Wholesale Generation Pricing
Following NT Power’s withdrawal from the Territory’s
electricity market effective in September 2002, and
recognising the pricing implications that can arise from
monopoly service provision, the Government approved in
principle a process of prices oversight of Power and
Water’s generation business by the Commission for as
long as that business is not subject to competition or
the tangible threat of competition. The purpose of such
regulation is to ensure that the wholesale energy prices
paid by contestable customers are similar to those that
would occur in a competitive environment and that Power
and Water’s generation business recovers over time from
individual contestable customers no more than the
reasonable long-run cost of supplying them with
wholesale energy, including a return on capital invested
commensurate with the commercial and regulatory risks
involved.
In
April 2005 the Commission undertook a review of the
generation component of electricity prices paid by
contestable customers, with that review covering the
financial years 2002-03 and 2003-04.
The
Commission found that during 2002-03 and 2003-04, Power
and Water's wholesale electricity generation prices were
generally consistent with the Commission's estimates of
the reasonable costs of generation in those years.
The
Commission updated this assessment in June 2006. The
Commission found that during 2004-05 there were
increases in Power and Water's average wholesale
generation revenues per kWh, which now brings them close
to or slightly above the Commission's estimates of the
reasonable costs of generation. These increases were
mainly due to the cost of fuel and a shift in the asset
valuation methodology used for pricing from book values
to replacement values.
System Imbalance Prices
The NT electricity market is
based on a bilateral contracting system, rather than a power pool, or spot
market. Suppliers of electricity to contestable customers are required as a
licence condition to take reasonable steps to ensure that they have sufficient
generation available to meet the load of their contracted customers.
Under the Network Access Code,
the Commission oversights prices paid (or received) by third-party generators
when purchasing (or selling) any mismatches between the energy generated by such
generators and the load attributable to end-use customers supplied by these
generators.
Following revisions to the
Network Access Code that took effect on 1 July 2001, the Commission determined
various system imbalance prices to apply until new economic dispatch
arrangements envisaged by revisions to the Network Access Code were in place and
fully operational. These prices remain in place until superseded.
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