20 Jun 2012 Electricity
On 15 June, the Commission announced that it had decided to commence an investigation of the wholesale electricity component of the retail costs that make up the standing contract price.
The Commission has today released a Discussion Paper, commencing the investigation process. Given the significance of its standing contract price setting role, the Commission is seeking public comment on the issues raised in the Discussion Paper, and any relevant related issues, in order to ensure that it has the best available evidence to draw on in making and reporting any findings.
The Commission’s 2010 determination of the standing contract price included wholesale cost allowances that were based on the long run marginal cost of generation. The Commission was unable to rely on wholesale contract data for that review, given the lack of liquidity in the trading of wholesale contracts. Wholesale market liquidity has since increased, and market data suggests that wholesale costs incurred in retailing to standing contract customers may have changed from the amount determined through the long run marginal cost approach.
The Commission flagged in its 2010 Price Determination that such a review may occur, should liquidity in the wholesale market improve.
The Commission intends to conduct the investigation over the course of the next 6 months. If the Commission determines that there has been a material change in the wholesale electricity relevant to the standing contract price, it will make any consequential change to the standing contract price in December 2012, to apply from 1 January 2013.
Comments are sought on the Discussion Paper by close of business on Wednesday, 18 July 2012.
Electricity Standing Contract – Wholesale Electricity Costs