NZ's electricity market isn't deep and liquid enough to cater for hedging, PM Key says in response to Genesis price spike
Prime Minister John Key says it’s unfortunate New Zealand does not have a deep and liquid wholesale energy market as private businesses and other electricity companies reel from a price spike by Genesis Energy that raked in NZ$56 million in seven hours.
Genesis increased wholesale electricity prices by more than 200 times the normal rate for seven hours just over a week ago, after Transpower announced it was shutting its lines into Auckland for maintenance.
The spike meant Mighty River Power had to pay fellow SOE Genesis NZ$25 million, Meridian paid NZ$12 million and Powershop paid NZ$1.7 million to access wholesale electricity for Auckland during that time.
Key said previously-announced energy market reforms would hopefully help the situation, but that everyone needed to acknowledge it was a highly illiquid market.
"It would be great if we had a liquid and deep market for hedging, but the reality is we don’t,” Key said at his regular post-cabinet press conference on Monday.
Genesis has rejected criticism of its actions. See more here in Gareth Vaughan's March 30 article.