28 Jun 2022

Electricity Authority rules Contact Energy and Genesis played no part in power blackouts

2:00 pm on 28 June 2022

The Electricity Authority has ruled that Contact Energy and Genesis played no part in power blackouts in August last year.

power pylon

Photo: RNZ / Diego Opatowski

Its investigation centred on decisions made when the country faced its largest peak demand after one of the coldest nights of the year and generation unexpectedly declined, following a drop in wind generation and a weed clogging the intakes of the Takaanu power station.

Genesis' coal burning Huntly Power Station and Contact's geothermal station were offline and could not be brought online in time to service demand when it peaked in the evening.

A number of small retailers claimed the two big generators caused an undesirable trading situation (UTS), by withholding generation, which caused wholesale prices to spike.

Electricity Authority general manager of legal, monitoring and compliance Sarah Gillies said the decisions made by the two generators on 9 August were in the range of what the market might normally expect in the circumstances.

"This UTS investigation focused on three critical aspects of the 9 August event; the decisions made by Genesis and Contact Energy in relation to certain generation assets; the system operator's management of the grid emergency; and the application of scarcity pricing.

"In the authority's view, these were rational decisions based on the information at the time and were within the range of what the market might reasonably expect in the circumstances.

"For that reason, these decisions did not threaten confidence in or the integrity of the market."

It also said that while consumers were cut off, they were reconnected on the same day.

Earlier this year the authority held the national grid operator Transpower accountable for the blackouts, citing poor coordination and communication failures with generators.

Power retailer Electric Kiwi was one of the companies to bring forward the UTS claim.

Its chief executive Luke Blincoe said his reaction to the authority's decision was "disappointment, but not surprise".

"On that night on August 9 we had 40,000 homes with no power on the coldest day of the year, we had scarcity pricing triggered in error by Transpower, and a $130 million cost-to-buys on the wholesale market, yet the EA has come to the conclusion that confidence in the market has not been threatened."

He said families deserved better from their regulator.

The biggest thing they have got wrong in our view is that the Authority was not winding back the additional $130m that was charged to buyers on the wholesale market, he said.

"That is really a huge discrepancy for us."

Blincoe said he was weighing up a possible legal challenge of the regulator's decision.

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