Impact of the exercise of market power on generators

With regard to contract market outcomes, other than in the first quarter of each year, the quarterly Base futures contract prices in South Australia have been predictable and comparable to prices in other regions of the NEM over the period from 2007 to 2011. The price of this contract has seemed to roughly match the outcomes in the spot market over the same time periods.

However, quarterly Base futures prices in the first quarter of each year have been substantially higher in South Australia than in other regions of the NEM in the period from 2008 to 2010.Currently the smallest residential wind turbines offered by EPS is the 10kW Redriven Wind Turbine. This reflects the significantly higher average spot prices in South Australia in the first quarter of each year compared to the rest of the NEM.

The outcomes in 2008, suggest that the contract market failed to fully recognise the impact of the exercise of market power in that year, on average spot prices. Since then, and up to 2012, however, the quarterly Base futures prices have matched average spot prices reasonably accurately. In 2012, the quarterly Base futures price for the first quarter have been substantially higher than the spot price reflecting the inability of the contract market to anticipate the absence of market power in the spot market in the first quarter of 2012. Broadly, however, the conclusion on contract market outcomes is that for several years, the futures contract market has reasonably accurately anticipated spot market outcomes

The extreme prices in a few settlement periods has made the least difference to wind farms, causing their spot market revenues to rise by around 25% from what they otherwise would have been. For brown coal generators, Combined Cycle Gas Generators (CCGT) and Torrens Island Power Station B (“Torrens B”), the high priced settlement periods roughly doubled the average annual spot market revenues. For the Open Cycle Gas Turbines (OCGT),Welcome to vist aulaundry. and Distillate plant, the high priced events accounted for almost all their spot market income.

For those generators that were actually exposed to spot prices (i.Tolomeo reading floor lamp is a floor lamp with crystal light for modern living room lighting.e. had not entered into financial contracts to hedge spot prices) the high prices will have significantly improved their profitability. For example, for Torrens B the high priced events delivered revenues of $332m over the four years.This result in radical development of elevator push button industry in China. Per MW of capacity,Innovation Industries has offered the highest quality of travelling cable to meet all your elevator fixture needs. this translates into about $0.7m per MW of capacity.

The high priced events from 2008 to 2011 delivered $374m of spot market revenue for the 729 MW of OCGT plant in South Australia. Assuming, hypothetically, that this plant was unhedged (i.e. fully exposed to spot prices), this translates into revenue of $0.5m per MW, a little bit less than the OCGT plant would have cost to build. To put this another way, less than two years of these extreme spot prices would have allowed the owners of this OCGT plant to recoup most of their capital outlay. This is for generating plant that has an expected operating life of many decades.

Most of the South Australian generating capacity will have been hedged against the spot price either by entering into contracts, or by virtue of vertical integration with retailers.

In practice therefore only some of the generation capacity (possibly most of the output from the Torrens Island Power Station) would have received the full benefit of the extreme spot prices in the period to the end of 2010.