AER reports on high wholesale electricity prices in New South Wales and Queensland on 10 February 2017

The Australian Energy Regulator (AER) monitors and reports on events and causes that result in the wholesale electricity spot price exceeding $5000 per megawatt hour (MWh).

While the wholesale electricity spot price exceeding this threshold triggers the AER reporting, there can be many reasons a high spot prices occurs, including supply-demand conditions in the wholesale market at the time.

On 10 February 2017, wholesale electricity spot prices reached $12 915/MWh in New South Wales and $12 221/MWh in Queensland at 5pm. Spot prices in New South Wales also reached $13 967/MWh at 5.30 pm and $14 000/MWh at 6 pm.

The AER’s analysis found the following factors contributed to the high prices:

  • High temperatures (38 degrees in Sydney and 33 degrees in Brisbane) led to high demand for electricity in both states.
  • A number of generators in New South Wales experienced technical difficulties late in the day. This significantly reduced available low priced local electricity supply. Higher priced supply was needed to meet the demand, causing the spot price to increase rapidly to above $12 000/MWh in both states at 5 pm.
  • More electricity was imported into New South Wales than the network could manage. When imbalances like these occur the Australian Energy Market Operator (AEMO) must return the power system to safe state as quickly as possible. To address the imbalance, AEMO instructed a large industrial customer in New South Wales to temporarily reduce its load by 290 MW, avoiding the need to interrupt electricity supply to households and small businesses.

Rebidding from low to high prices did not contribute to the high price events.

More in-depth analysis of these events can be found in the AER’s 10 February 2017 high price event report.

Most end-customers are not directly exposed to wholesale electricity prices. Energy retailers are the main purchasers in the wholesale electricity market. Retailers bundle electricity with network services for sale to their residential, commercial and industrial customers. Generators and retailers can manage their exposure to price variations in the wholesale market by entering hedge contracts that lock in firm prices for the electricity they intend to produce or buy.

The AER’s role in monitoring wholesale energy markets and reporting on high price events helps to enhance market transparency and compliance. Our analysis provides a foundation to detect non-compliance, market irregularities, inefficiencies and consumer harm. We draw on this work to advise the COAG Energy Council, other stakeholders and market bodies on wholesale market issues. We typically publish our reports into high price events within 40 business days.

Issued date: 
5 May 2017
AER reference: 
AC 48/17