AER reports on high wholesale electricity prices in Victoria and South Australia on 1 March 2019

The Australian Energy Regulator (AER) has released its analysis into high wholesale electricity spot prices on 1 March 2019 in South Australia and Victoria.

The AER monitors and reports on events and causes that result in the wholesale electricity spot price exceeding $5000 per megawatt hour (MWh). The wholesale electricity spot price exceeding this threshold triggers the AER reporting, but there can be many reasons a high spot price occurs, including supply-demand conditions in the wholesale market at the time.

On Friday 1 March 2019, spot prices exceeded $5000/MWh for the 4 pm, 4.30 pm and 5 pm trading intervals, reaching $6915/MWh, $12 635/MWh and $12 472/MWh respectively in Victoria, and $6765/MWh, $12 609/MWh and $12 067/MWh respectively in South Australia. Forecasts from the previous day anticipated spot prices to be at the price cap.

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

  • Temperatures were high in both regions, reaching 38ºC in Melbourne and 40ºC in Adelaide leading to high demand for electricity.
  • Of around 14 800 megawatts (MW) of maximum possible generation usually available in Victoria and South Australia during summer, on the day generators offered about 12 600 MW, with the difference primarily due to reduced availability of wind generation.
  • Despite higher than forecast imports from neighbouring regions, higher-priced local electricity was needed to meet demand.

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

More in-depth analysis of these events can be found in the AER’s report 1 March 2019.

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 wholesale market price variations by entering hedge contracts that lock in prices for the electricity they intend to produce or buy and these instruments would have affected overall financial outcomes on the day.

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

Issued date: 
1 May 2019
AER reference: 
AC 57/19