As a part of its Energy Reform Strategy NSW proposes to disaggregate its three electricity portfolios into five Gentrader bundles using a bidding process that is expected to be finalised at the end of 2010.
The NSW Gentrader model is designed to allow the ownership of the power stations to be retained by the Government and the contractual rights to trade the electricity produced to be held by privately owned Gentraders.
Each Gentrader has the right to trade the electricity into the wholesale market that is produced by the group of generating assets to which it is attached.
Aggregating generating assets into larger bundles assists in managing risk exposure caused by an outage of any power station within the bundle. This co-insurance arrangement is intended to retain some of the risk management benefits resulting from having a larger portfolio of generating assets, while allowing the trading rights of electricity generated by these stations to be sold in disaggregated bundles.
If there is an outage at one of the generating assets, which causes the level of electricity being produced to fall below a predetermined level to be set under the co-insurance arrangement, the Gentraders will be required to provide each other with financial compensation.
“The ACCC recognises that the NSW Government’s proposed Energy Reform Strategy should result in competitive benefits in the wholesale and retail supply of electricity in NSW.” ACCC chairman Graeme Samuel said.
“However, the ACCC is not satisfied that the co-insurance arrangement is necessary for the reforms to be implemented or for the benefits of the reforms to be realised.” Mr Samuel said.
“Given this, the ACCC does not consider that there is a case for the Gentraders to be required to take part in a co-insurance arrangement that they may not want or need.”
The ACCC does not consider that a decision to deny authorisation to the co-insurance arrangement should affect the NSW Government’s ability to proceed with the Energy Reform Strategy and in particular, the Gentrader arrangements.