What is a stress test?
Find out more about who is a disclosing participant and what information they must provide.
The stress testing regime requires certain industry participants (disclosing participants) in the wholesale electricity market to apply a set of standard stress tests to their market position, and report the results to their Board and to an independent registrar (NZX) appointed by us.
Disclosing participants are participants who:
- consume electricity that is conveyed to them directly from the national grid
- buy electricity from the clearing manager.
Disclosing participants must provide the following information quarterly to the registrar:
- annual net cash flow from operating activities (as set out in the most recent audited financial statements);
- level of shareholders' equity (as set out in the most recent audited annual financial statements)
- for each stress test:
- the estimated value of electricity that it expects to sell to the clearing manager during the period that the stress test is applied, minus the estimated value of that electricity when the base case is applied
- the estimated value of electricity that it expects to purchase from the clearing manager during the period that the stress test is applied, minus the estimated value of that electricity when the base case is applied
- the estimated projected net cash flows from operating activities when the stress test is applied, minus the estimated value of those cash flows when the base case is applied
- a statement as to whether the disclosing participant has an explicit risk management policy in respect of its exposure to the wholesale market and, if so, the target cover ratio for each stress test calculated in accordance with a method published by us.The registrar collates these results and provides them to us in a form that ensures individual participants are not identified - we then publish a report of results.
Disclosing participants subject to the stress test regime are able to review these reports, and compare their exposure to that of other participants. The Authority’s reporting of stress test results can be found on our EMI website.
Certifying disclosure statements
Each disclosing participant must submit to us a certificate verifying the participant's Board has considered the disclosure statements for the certification period.
The certificate must also confirm that the participant has provided information about the stress tests to any of its customers who entered into or renewed a supply contract with any spot price exposure, so as to allow the customer to consider their own stress test outcomes.
For more information email our market operations team with “stress testing” in the subject line.