Electricity authority to take no action on December price rise

The Electricity Authority is not taking its investigation into high spot electricity prices in early to mid-December last year any further after releasing a report on the causes.

Towards the end of November, wholesale spot prices began to increase and climbed rapidly throughout the first three weeks of December. The average price at the Haywards reference node for the first 22 days of December was $135.90 per MWh, up 144 percent on the November average and 158 percent on the average between December 1 and December 22 in 2009.

The authority released a report on the issue today, which identified a number of factors including uncertainty about lake levels -- which were at average levels, but were trending downwards -- while inflows to hydro reservoirs were well below average levels.

A strong La Nina weather was pattern emerging, typically associated with below normal inflows and early melting of the snow pack, which meant that reliance on lake levels as a guide to storage conditions could be misleading.

The report also cites uncertainty regarding the planned Maui outage in February 2011 and uncertainty regarding thermal plant availability.

"Hydro generators, acting in an environment of incomplete information and concern about hydrology, raised offers to the degree necessary to induce conservation of storage," the report said.

The authority concludes that further investigation is not warranted.

"The authority's assessment is that the market responded appropriately to the higher prices. Some large-scale consumers reduced consumption and all available thermal plant was utilised, with some thermal generation offline for maintenance quickly being brought back into service."

No transmission outages occurred.

The report highlights the importance of timely and reliable information for a well-functioning market.

To address this issue, the authority intends to review policies, procedures and oversight mechanisms relating to information disclosure, as part of the implementation of its market monitoring regime.