New Zealand Gazette – 1996 – No. 16

Page 534

✨ Electricity Contract Mechanism



NEW ZEALAND GAZETTE

No. 16

more than the quantities indicated in the table, from time to time.

Offers

  1. The initial offer will be made by way of tender in five tranches at monthly intervals (or possibly shorter intervals for the later tranches). Each tranche will consist of a combination of year 1, year 2, year 3, year 4 or year 5 blocks. The minimum block size will be 1000 GWh and the maximum block size will be 5000 GWh. An illustrative example of the initial offer is outlined in the following figure.

Illustrative Initial Tender

  1. ECNZ’s customers will have more than one opportunity to tender for blocks of electricity in any one year.

  2. The initial offer will be put in place when the new SOE is in a position to offer contracts but not later than 1 December 1995. ECNZ will continue to offer contracts to cover the intervening period.

  3. Following the initial offer, ECNZ will use a range of normal contract processes (which may include an ongoing tender process) to maintain the profile set out in paragraph 2.

  4. ECNZ will be responsible for setting its offer prices, including reserve prices for electricity offered by tender.

  5. During the establishment period, ECNZ will consult the shareholding Ministers on its proposed pricing.

Duration

  1. ECNZ’s obligation to offer contracts in accordance with this Appendix will cease once ECNZ’s share (including its interest in joint ventures referred to in Appendix 4 and in companies ring-fenced under Appendix 5) of the total New Zealand generating capacity measured in MW capacity terms is 45% or less of the total, and that share has been verified by the Secretary of Commerce.

Explanatory note:

Under the measures set out in this Memorandum, ECNZ will continue to have a significant market share. Its incentive to unduly influence the spot price will be substantially reduced if, in a year ahead, a large proportion of its firm capacity is covered by contracts. The mechanism outlined above will enable wholesale buyers to—

  • limit ECNZ’s incentives to unduly influence the spot price by contracting with ECNZ up to the levels specified in paragraph 2; and

  • establish electricity prices for at least the initial offer phase by competitive tendering; and

  • insure themselves against major price fluctuations.

Wholesale buyers will be able to indicate in a formal competitive process the value they put on electricity over different time-frames.

This is a significant step towards a competitive wholesale electricity market.

APPENDIX 7

Revisions to ECNZ’s Statement of Corporate Intent

The ECNZ Board will amend ECNZ’s Statement of Corporate Intent as set out below (deletions from the 1994-95 SCI are crossed-out and insertions italicised):

“AA: Commercial Objectives of the Corporation

The Directors intend acknowledge and accept the requirement of shareholding Ministers for the Corporation to operate as a successful business and, in particular, to be



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✨ LLM interpretation of page content

🏢 Contract Offer Mechanism (continued from previous page)

🏢 State Enterprises & Insurance
Electricity Contracts, Tender Process, ECNZ, Market Share, Pricing Guidelines