2014 Reports to the Minister Markets Team Ken Michael Room, 25 September 2014 Ensuring quality services for a reasonable price 1 Workshop

Ensuring quality services for a reasonable price 2 Markets Team Bruce Layman Elizabeth Walters Jeremy Cook Natalie Jackson Holly Medrana Shibli Khan

Purpose of this workshop 1.Wholesale Electricity Market 2.Electricity Generation and Retail Corporation Regulatory Scheme Ensuring quality services for a reasonable price 3 to be considered in preparation of Discussion Papers. Stakeholder feedback on the effectiveness of:

 EMR  Review of WEM - Overview of ERA Requirements  Considerations from 2013 Report to Minister  Workshop  EMR  Review of WEM - Overview of ERA Requirements  Considerations from 2013 Report to Minister  Workshop  The EGRC Regulatory Scheme  Overview of ERA’s Requirements  Workshop  The EGRC Regulatory Scheme  Overview of ERA’s Requirements  Workshop Ensuring quality services for a reasonable price 4 Workshop: Content and Process 9:00am to 10.45am 10:45am to 11:00am: Break 11:00am to 12:00pm

Ensuring quality services for a reasonable price 5 Process Today October November/ December November/ December Early 2015 Preliminary workshop Individual meetings Discussion Paper and Public Consultation Reports provided to Minister

Follow up  Request a meeting  Issues for consideration  Feedback for future engagement Ensuring quality services for a reasonable price 6 Handouts:

 Addresses matters ERA has raised for a number of years  Industry structure – government ownership  Market Governance  Reserve Capacity Mechanism  Constrained network access Ensuring quality services for a reasonable price 7 Electricity Market Review: ERA Submission

 Perspective- ERA Review based on market as is  Not duplicate EMR  Recognise market likely to be modified  Adapt focus Ensuring quality services for a reasonable price 8 Electricity Market Review Implications for ERA Review

2014 Review of Wholesale Electricity Market  Triennial WEM Report  2014 Annual WEM Report to the Minister Ensuring quality services for a reasonable price 9 Incorporates:

Ensuring quality services for a reasonable price 10 ERA’s review Assess the effectiveness of the market in achieving the Market Objectives Investigate market behaviour if it has resulted in the market not functioning effectively Make recommendations for increasing the effectiveness of the market

Ensuring quality services for a reasonable price 11  promote the economically efficient, safe and reliable production and supply of electricity and electricity related services in the SWIS;  encourage competition among generators and retailers in the SWIS, including by facilitating efficient entry of new competitors;  avoid discrimination in that market against particular energy options and technologies, including sustainable energy options and technologies such as those that make use of renewable resources or that reduce overall greenhouse gas emissions;  minimise the long-term cost of electricity supplied to customers from the SWIS  encourage the taking of measures to manage the amount of electricity used and when it is used.  promote the economically efficient, safe and reliable production and supply of electricity and electricity related services in the SWIS;  encourage competition among generators and retailers in the SWIS, including by facilitating efficient entry of new competitors;  avoid discrimination in that market against particular energy options and technologies, including sustainable energy options and technologies such as those that make use of renewable resources or that reduce overall greenhouse gas emissions;  minimise the long-term cost of electricity supplied to customers from the SWIS  encourage the taking of measures to manage the amount of electricity used and when it is used. Market Objectives

Ensuring quality services for a reasonable price 12 Specific requirements for report Summary of data and analysis compiled by the IMO and ERA Assess effectiveness of each aspect of the market including the effectiveness of the IMO and System Management in carrying out their functions Assessment of specific events, behaviour, matters that impacted effectiveness of market Recommend measures for increasing the effectiveness of the market

Ensuring quality services for a reasonable price 13  Reserve Capacity market  Market for bilateral contracts for capacity and energy  The STEM  Balancing  Dispatch process  Planning processes  Administration of the market, including Market Rule change process  Ancillary Services  Reserve Capacity market  Market for bilateral contracts for capacity and energy  The STEM  Balancing  Dispatch process  Planning processes  Administration of the market, including Market Rule change process  Ancillary Services Elements of Market required to be reviewed

 Performance of “new” Balancing and LFAS markets  Bidding behaviour  SRMC requirements  Constraint payments Ensuring quality services for a reasonable price 14 Considerations from 2013 Report to the Minister Matters flagged for further review:

Proportion of Capacity offered in Price Ranges by quarter and quarterly Average Peak and Off-Peak Balancing Price

Your Views Ensuring quality services for a reasonable price 16

Break Return for: 2014 Review of EGRC Regulatory Scheme Ensuring quality services for a reasonable price 17

 First annual review of EGRC Regulatory Scheme. Ensuring quality services for a reasonable price Review of EGRC Regulatory Scheme

Ensuring quality services for a reasonable price 19 Comprises:  The EGRC Regulations  The Segregation and Transfer Pricing Guidelines  The (Standard Product) Wholesale Arrangements Comprises:  The EGRC Regulations  The Segregation and Transfer Pricing Guidelines  The (Standard Product) Wholesale Arrangements The EGRC Regulatory Scheme

Ensuring quality services for a reasonable price 20 ERA’s requirements Review effectiveness of operation of Scheme at least annually and make recommendations for improvement, Also required to investigate any non- compliance identified by the Auditor General.

Ensuring quality services for a reasonable price 21 Scheme Aims to:  ensure Synergy does not unduly preference RBU and GBU over third party retailers & generators;  provide private sector access to electricity on non-discriminatory terms;  mitigate concerns of private- sector market participants. Scheme Aims to:  ensure Synergy does not unduly preference RBU and GBU over third party retailers & generators;  provide private sector access to electricity on non-discriminatory terms;  mitigate concerns of private- sector market participants. Aims of EGRC Regulatory Scheme

Ensuring quality services for a reasonable price 22 Segregation into business units  Transfer pricing  Ring fencing Wholesale trading  no discriminating between RBU and competitors  no taking into account financial interests of RBU  Wholesale Electricity Supply Policy & Wholesale Energy Credit Policy  Standard Products - price notionally paid by RBU for equivalent product Compliance Regime  AG audits and Authority investigates and enforces Segregation into business units  Transfer pricing  Ring fencing Wholesale trading  no discriminating between RBU and competitors  no taking into account financial interests of RBU  Wholesale Electricity Supply Policy & Wholesale Energy Credit Policy  Standard Products - price notionally paid by RBU for equivalent product Compliance Regime  AG audits and Authority investigates and enforces Components of Scheme

Ensuring quality services for a reasonable price 23 Test against:  Does it ensure Synergy does not unduly preference RBU and GBU over third party retailers & generators;  Does it provide private sector access to electricity on non-discriminatory terms;  Does it mitigate concerns of private- sector market participants.  Complexity and cost  Practical experience Test against:  Does it ensure Synergy does not unduly preference RBU and GBU over third party retailers & generators;  Does it provide private sector access to electricity on non-discriminatory terms;  Does it mitigate concerns of private- sector market participants.  Complexity and cost  Practical experience How to assess?

Your Views Ensuring quality services for a reasonable price 24

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