An Electricity Authority review of the well-publicised events of winter 2024 has found that large industrial consumers had access to enough hedges ahead of time to protect themselves from skyrocketing wholesale electricity prices, and – despite claims to the contrary – that higher prices did not benefit generators.
Generator energy margins were lower over the period of high prices in August than they were in July or September.
A severe and unexpected shortage of gas, combined with low hydro lakes and an extremely dry winter resulted in increased wholesale electricity prices for around three weeks over July and August 2024.
The report by the EA has found that large industrial consumers had access to enough hedges ahead of time to protect themselves against high wholesale electricity spot market prices.
“While New Zealand’s electricity system has its challenges, it's good to see the Authority conclude that the market is operating as it should,” says Meridian Chief Financial Officer Mike Roan.
“While we acknowledge the impact that the closure of these businesses had on local communities, those industrial customers knew the risks and had options available to them. They chose not to go with them. That’s a tragedy for their workers, and for those communities.”
The report found that periods of high wholesale electricity prices reflected the scarcity of various fuel sources, including gas, water and wind, and that generators were not making higher profit margins during those periods.
The Authority also found that all residential households were entirely sheltered from the high wholesale prices because of hedging by their retailers.
“As an industry, we take our responsibilities to our customers and New Zealand extremely seriously,” says Mike Roan.
“We're doing everything possible to look after our customers and ensure that New Zealand has access to the electricity it needs this winter.”