Genesis Energy rejects accusation of “despicable” conduct
Media Statement 30 March 2011
Genesis Energy rejects accusation of “despicable” conduct by Powershop
Genesis Energy rejects criticism by some market participants that it acted unreasonably during a well-signalled transmission outage on Saturday 26 March 2011.
A constraint on the National Grid in the Upper North Island on Saturday 26 March resulted in very high spot prices in the wholesale electricity market. The transmission constraint arose from planned outage work by Transpower which it had signalled to the market well in advance and was common knowledge in the industry.
Genesis Energy offered hedges to cover the potential trading risk market participants faced from the outage as late as Friday afternoon. Hedges were also offered during the constraint itself.
Prices offered into the wholesale market by Genesis Energy are designed to recover the costs of operating expensive thermal power stations with high operating costs in circumstances where they have declining utilisation. The prices obtained when its thermal units do run must cover the many trading periods when the units do not run.
Genesis Energy has for many months been offering hedges and other forward products to the market in order for participants to prudently manage their risks. It will continue to do so and is prepared to consider any type of commercial hedge product that best meets the needs of an individual market participant. No retail customer was exposed to the high prices in the spot market and customers are at liberty to choose their electricity provider in what is a highly competitive market.
Genesis Energy General Manager Corporate Affairs Malcolm Alexander said that “we have been very clear to the market that it is not Genesis Energy’s role to cover and pay for the spot market risk that some market participants choose to take. We have high costs to operate our plant and we will recover those costs when the opportunity arises.”
“Our door is always open to those who wish to enter into commercial arrangements with us,” he concluded.