29 Feb 2012

Ruling 'provides guidance' to electricity industry

7:12 am on 29 February 2012

A High Court ruling relating to a massive electricity price spike last year is expected to provide some certainty to players in the wholesale market.

Prices reached nearly $20,000 a megawatt hour due to a planned maintenance shutdown in March last year, causing an outcry among some firms that did not have hedging in place.

The event prompted the Electricity Authority to declare an Undesirable Trading Situation and reset prices to $3000 a megawatt hour to maintain the integrity of the market.

Three firms - Todd Energy-owned Bay of Plenty Energy, Contact Energy and Genesis Power - appealed against the authority's decision, saying it rewarded bad business practice, but the High Court on Monday ruled against them.

A partner at law firm Kensington Swann, Bryan Gunderson, says the court's decision will help the authority and market participants to approach future trading events with more certainty.

"It's particularly helpful in that the High Court endorsed the Electricity Authority's approach to the definition of what is an Undesirable Trading Situation

"That provides guidance for electricity industry participants going forward."