Tony Baldwin
Business | Policy
 
 
     
 
 
 
 
 
 
 
 
 
     

Hedge Market Development Project
September 2004 - late 2006

 

Electricity hedge market

This is the market for instruments that help market participants to manage risks associated with spot and locational (basis) pricing risks

Objectives

Established by the Electricity Commission, the project's terms of reference require a group of senior executives and consumer representatives to explore issues and options, and if possible reach an agreement, on how to improve the hedge market in a manner that meets the requirements of market participants, the Electricity Commission(EC), the Government, and various interest groups.

My input

As chairperson, I contribute to the group by:

  • Providing a strategy and approach to achieve the objective
  • Helping to find a common framework
  • Developing a chemistry of intellectual openness and rigour
  • Bringing in a range of outside expert views
  • Distilling common ground on robust options
  • Facilitating group presentations to the EC Board
  • Liaising closely with the secretariat and the EC's senior adviser

Group membership

The group's membership comprises:

  • Tony Baldwin (Chair), Consultant
  • Carl Daucher, formerly GM, Strategy + Development, NZ Stock Exchange (retired from Hedge Group in late 2006)
  • James Moulder, GM Sales, Mighty River Power
  • Mark Trigg, GM Trading, Contact Energy
  • Paul McIver, formerly Wholesale Trading Manager, Trustpower (retired from Hedge Group in late 2006)
  • Ralph Matthes, Executive Director, Major Electricity Users Group
  • Russell Longuet, Independent energy consultant
  • Steve Barrett, former CEO, Contact Energy (retired July 2005, replaced by Mark Trigg)
  • Tim Street, Senior Adviser, Electricity Commission

The Market Place Company provides secretariat support

Key steps

  • Define scope and nature of problems, including a survey of market participants to better understand their needs and perceptions of the contracts market
  • Take advice from a range of experts
  • Define and analyse change options
  • Agree on a preferred package
  • Provide detailed paper to EC, for consultation with industry

Group's main outputs

  • A range of internal papers
  • Presentations to EC board
  • Unanimous agreement among members on a preferred package of changes
  • This package, and the accompanying analysis of options, is outlined in a set of consultation papers prepared for the Commission by the Group

Experts consulted

  • John Small, Covec
  • Mike Thomas, Charles River Association
  • Conrad Edwards, Transpower
  • Jomar Eldoy, M-co
  • Tim Grafton, UMR
  • Graham Shuttleworth, NERA
  • John Culy, Morrison & Co
  • Simon Coates, Contact
  • John Culy/Grant Read, CRA
  • Brent Layton, NZIER
  • Paul Quilkey, Westpac
  • Nigel Williams, ANZ

Current situation

Industry parties made submissions to the Commission in late 2006 on the Group’s preferred package of changes. The submissions expressed a relatively high level of agreement or endorsement.

In early 2007, after considering submissions, the Electricity Commission approved the Group’s preferred package and directed the Commission’s staff to proceed with implementation as proposed by the Group.

In August 2007, the Commission issued a consultation paper on Disclosure of Risk Management Contract Information.

In September 2008, the Commission issued a consultation paper on Issues for Managing Locational Price Risk

The Group’s role now is to act as a sounding board for the Commission as it proceeds with implementation. The Group meets at the Commission’s request.