1. Industry and market monitoring at the Electricity Authority Phil Bishop, Electricity Commission and Ramu Naidoo, PSC 26 October 2010

2. 2 Overview Electricity Authority – objective and functions Key monitoring uses and activities Markets to be monitored Methods Next steps vSPD (vee-SPuD) Overview of formulation Applications to date Future work

3. 3 Focused objective Authority’s objective promote competition in, reliable supply by, and the efficient operation of, the electricity industry for the long-term benefit of consumers (clause 15, Electricity Industry Act 2010) Commission objectives and outcomes that are not objectives of the Authority include: fairness environmental sustainability promotion of electricity efficiency c.f. sections 172N and 172O of the Electricity Act 1992 (as amended)

4. 4 Functions of the Authority See clause 16: a)to maintain a register of industry participants b)to make and administer the Electricity Industry Participation Code c)to monitor compliance with the Act, the regulations, and the Code d)to investigate and enforce compliance with parts 2 and 4, the regulations, and the Code e)to investigate and enforce compliance with part 3 f)to undertake market-facilitation measures (such as providing education, guidelines, information, and model arrangements), and to monitor the operation and effectiveness of market facilitation measures g)to undertake industry and market monitoring, and carry out and make publicly available reviews, studies, and inquiries into any matter relating to the electricity industry h)to contract for market operation services and system operator services i)to promote to consumers the benefits of comparing and switching retailers j)to perform any other specific functions imposed on it under this or any other Act

5. 5 Key uses and activities Uses Inform and assist the Authority’s code development activities Provide interested parties with sufficient information to determine if the sector’s performance is in the long term interests of consumers Provide additional discipline on participant’s pricing decisions (when they possess market power) Activities Routine measuring, testing, screening, comparing against benchmarks/thresholds and reporting Provision of data and information (data warehouse project) One-off reviews and studies The Authority does not seek to become the price police – that is the role of the Commerce Commission

6. 6 Markets and priorities Priorities determined in recent months by the Establishment Board 1.Assess competition in NZ’s electricity markets, including: retail, wholesale, ancillary services, and forward markets 2.Assess reliability of supply – from an efficiency perspective 3.Assess transaction efficiency Markets to be monitored 1.Wholesale spot market (incl. resource adequacy) 2.Instantaneous reserves market 3.Forwards markets 4.Ancillary services markets 5.Fuels and inventories 6.Retail market 7.Distribution services market 8.Transmission services market

7. 7 Methods Data warehouse (access via internet) Models Transparent and freely available GAMS-based and open source E.g. vSPD with daily GDX files of input data for final pricing cases Matlab-based Distributed codes and compiled executables EA website (monitoring page) Routine screening and summaries One-off reports and studies

8. 8 User interface for GEM and vSPD

9. 9 Data warehouse Data Warehouse Server (ECOM039) Internet FTP Server (ECOM046) Data arriving via SFTP (pushed) Users Service Provider Analysts

10. 10 Progress and next steps Progress Data warehouse started Guidelines on data gathering and dissemination Core tools being developed/enhanced Next steps Internal work plan (Nov) Information paper for industry stakeholders (Dec) Data management plan (Dec) Adapt models to generate competition measures (Dec) Data warehouse accessible via internet (July 2011)

11. 11 Overview - vSPD SPD used as the market clearing engine (MCE) in NZ electricity market Mathematical formulation documented and publicly available vSPD based on the published mathematical formulation Developed using GAMS Estimation of some input parameters (e.g. loss segments)

12. 12 Vectorisation

13. 13 vSPD inputs 1 per final pricing case (48 trade periods) ~35MB ~5MB

14. 14 vSPD GUI – configure and solve 1 2 3 4 5 6

15. 15 vSPD GUI - offers

16. 16 vSPD outputs

17. 17 Price comparison

18. 18 Price comparison (cont…)

19. 19 Some applications of vSPD Variable reserves investigation Investigation of scarcity pricing implementation options within the MCE Market impact assessments of rule breaches

20. 20 Ongoing and future work Improving quality of input data into vSPD Enhanced override functionality Additional reporting Further development of GUI Sensitivity module