NECA: Investigation into the events of 25 January 2003
NECA announced on 3 February an investigation into the events in the electricity market on Saturday 25 January, when damage to the Moomba gas processing plant severely reduced gas supplies to Adelaide. The report of that investigation is available to download.
Our report concludes that, overall, the electricity market performed extremely well. It coped with the challenge of the gas supply shortage essentially as it was designed to do.
Saturday 25 January was the hottest Adelaide day since the national electricity market was launched in December 1998. Demand was also the highest-ever on a Saturday, although still more than 10 per cent below South Australia’s record weekday demand. Despite this, and despite the gas shortages that from 5pm progressively forced 690MW or 25 per cent of South Australia’s total generating capacity to close down, there was never any threat of even limited blackouts.
Wholesale spot market prices peaked at just over $300/MWh in the early afternoon, and averaged $200/MWh throughout the afternoon and early evening, compared to typically $50/MWh on a normal summer Saturday. 25 January, however, was never going to be a normal Saturday. The temperature and the resulting record demand meant that the system operator had anyway been forecasting prices of $150/MWh even before the gas supply shortages hit. The increase in average prices compared to that forecast was therefore just $50. This was despite the 25 per cent of total available capacity that had been forced to close down and the further 475 MW, or almost another 20 per cent of the total, that had to switch to more expensive alternatives to gas-fired generation. Albeit partly because of the long weekend, those prices were very significantly lower than the $680-3,100/MWh prices South Australia experienced during the three most recent previous, less severe gas shortages.
Electricity customers were not directly affected by those prices. Even after taking account of the prices on 25 January, the average price for the week 19-25 January was $58/MWh. The longer-term average for the twelve months to 25 January is even lower, at $39/MWh. This compares to the annual average spot market price of $71/MWh provided for in ESCOSA’s October 2002 retail prices determination.
Nonetheless, flowing from our investigation, we have charged NRG Flinders, Origin Energy and International Power with alleged breaches of the market rules.
The events of Saturday 25 January also raise wider issues, which are also discussed in our report, for both the gas arrangements in South Australia and the national electricity market.
