AER releases reports on wholesale electricity high prices in Queensland on 13 and 14 January 2017

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

On 13 and 14 January 2017 wholesale electricity spot prices in Queensland exceeded this threshold on five occasions, reaching $13 883/MWh at 5 pm on Friday 13 January and $12 642/MWh, $8595/MWh, $9126/MWh and $10 417/MWh at 4.30 pm, 5 pm, 5.30 pm and 7 pm respectively on Saturday 14 January.

The AER’s analysis determined that a combination of factors led to the high prices across both days, including:

• High demand and record weekend demand for electricity. Queensland experienced six consecutive days of temperatures exceeding 30 degrees. In these circumstances electricity consumption is expected to be higher as the utilisation of high consumption devices like air conditioners increases.
• A reduction in the amount of low priced electricity offered by generators to the market. This reduction was mainly caused by plant limitations due to the high temperatures.
• Network limitations which reduced access to electricity available from other states.

More in-depth analysis of these events can be found in the AER’s 13 January 2017  and 14 January 2017 high price event reports.

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.

In addition to reporting on these high price events, the AER will shortly be publishing reports on the following price events in the energy and ancillary service markets: