2 Aug 2011

New electricity price market approved

1:29 pm on 2 August 2011

The Electricity Authority has approved a new market to offer protection against wild fluctuations in electricity prices.

It will trade in complicated arrangements known as financial transmission rights.

FTRs are long term contracts, which allow parties to protect themselves against unpredictable variations in electricity prices between the North and South Islands.

They have been introduced in response to an incident in late March when prices shot to four times crisis levels and 200 times normal levels.

Maintenance of the national grid had reduced the amount of electricity that could flow from south to north.

EA chief executive Carl Hansen says the new FTR market should boost competition between retailers and constrain the rate of electricity price increases.

He expects the market to be operational by October next year.

Cover will initially be available for prices from Benmore in the South Island and Otahuhu in the North Island, but the FTR market may be expanded to include more locations in time.