Electricity Authority concerned a lack of risk management tools for power companies could lead to high pricesn for customers

The Electricity Authority is concerned the lack of risk management tools available to help power retailers smooth out peak wholesale prices will disadvantage consumers.

A 131-page review of risk management options for electricity retailers by the Electricity Authority indicated there were few, if any, hedge cover contracts available for retailers to help manage price-risk at super-peak demand times.

"The market for this type of hedge contract is neither deep nor liquid, with some gentailers not offering hedges when requested," chief executive Sarah Gillies said, referring to whole power generators who also compete in the retail market.

Gillies said the scarcity of peak-time hedge contracts could lead to uncompetitive retail pricing.

However, the review was not able to get to the bottom of the reasons for scarcity issues.

"While the evidence points to scarcity, it did not definitively show why some gentailers sometimes elected not to respond to requests for proposals for shaped hedges, or why some gentailers provided non-conforming responses," the report said.

"While alternatives are emerging, that will take time," Gillies said.

"To support retail competition, we need to increase the liquidity of this type of contract and increase price transparency."

Gillies said the Electricity Authority and Commerce Commission's energy competition task force would follow up on the review's findings with a view to ensure there was increased market competition to support the entry of new generators and independent retailers.

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