The Australian Energy Regulator today issued its report into high prices in the National Electricity Market (NEM) in June this year.
"The AER is required under the National Electricity Rules to report on prices of over $5000/MWh in the NEM," AER Chairman, Mr Steve Edwell, said. "Between 12 June and 28 June there were 42 such events.
"June saw some of the highest prices since the start of the NEM in 1998. Prices averaged $274/MWh in New South Wales for the month compared to an average price of $33/MWh in June 2006. Prices were highest in New South Wales, but flowed on to other states.
"The price events also contributed to the highest annual prices in NSW and Victoria since NEM started. The average price in the 2006-07 financial year was $65/MWh in NSW and $59/MWh in Victoria compared to the previous highest prices of $46/MWh and $49/MWh respectively.
"The report finds that electricity prices were affected by a combination of high demand, constrained supply and generator bidding.
"Electricity demand rose sharply in June as cold winter days increased heating requirements. This is a normal seasonal response at this time of year.
"On the supply side, the drought continued to reduce generation capacity. In Queensland lack of water for generator cooling restricted output at two coal plants (Tarong and Swanbank) by around 800MW (or two per cent of NEM capacity), while low dam levels reduced hydro-generation output in Victoria, Tasmania and the Snowy region. Heavy rain and flooding in the Hunter Valley reduced coal generation capacity by up to around four per cent in New South Wales.
"In combination these factors led to tight supply–demand conditions. Some generators took advantage of these circumstances.
"Macquarie Generation, for example, repriced capacity into higher price bands during evening peaks on 12, 13, 14, 15, 16, 19, 20, 26, 27 and 28 June. Each of the $5000/MWh events occurred during these times.
"Typically Macquarie repriced up to 800MW (or around 20 per cent) of its capacity from under $500/MWh to over $5000/MWh between 5 p.m. and 7.30 p.m. These practices did not involve a breach of the National Electricity Rules."
The report will be available on the AER website.