Latest / The SME Stream / Bridget Abernethy: ERANZ chief executive on the market options available to companies amid power price surge

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Bridget Abernethy: ERANZ chief executive on the market options available to companies amid power price surge · The SME Stream

• 0:00
  Speaker 1: Now, on the subject of those mills closing this winter
• 0:02
  Speaker 1: and blaming electricity prices for it, it turns out they
• 0:05
  Speaker 1: did actually have the option to bring down their power bills.
• 0:08
  Speaker 1: The Electricity the Authority has put out a report saying
• 0:10
  Speaker 1: market options were available to the big power users during
• 0:13
  Speaker 1: this winter's price spikes. Bridget Abernathy is the chief executive
• 0:16
  Speaker 1: of the Electricity Retailers Association and with US Haybridge it oh. Hi,
• 0:21
  Speaker 1: so are we basically calling BS on their claim that
• 0:24
  Speaker 1: the power was too expensive or not complete? BS?
• 0:28
  Speaker 2: Look, I can't comment on the commercial arrangements of the
• 0:31
  Speaker 2: individual companies, but I think what the report shows is
• 0:35
  Speaker 2: that hedging options were available to industrial and commercial customers
• 0:40
  Speaker 2: right through that period of high volatility, and I think
• 0:46
  Speaker 2: that managing risk appropriately is an important part of operating
• 0:50
  Speaker 2: in a highly volatile wholesale electricity market.
• 0:54
  Speaker 1: How much cheaper were those options than what was available
• 0:57
  Speaker 1: on the market.
• 1:00
  Speaker 2: It's sort of shown on the The EA report shows
• 1:05
  Speaker 2: that they offered prices that overlapped with the A Ssex curve.
• 1:13
  Speaker 2: What I will say is, I think we know that
• 1:15
  Speaker 2: the hedge prices during that period were higher than usual,
• 1:20
  Speaker 2: but it's important to note that it's it's like trying
• 1:22
  Speaker 2: to find a mortgage when interest rates are high.
• 1:25
  Speaker 1: Yeah, but I don't really understand what that means. So
• 1:29
  Speaker 1: how much cheaper would it have been if they if
• 1:30
  Speaker 1: they use the alternative options?
• 1:33
  Speaker 2: Well, I don't think I can answer that easily. It's
• 1:37
  Speaker 2: every every individual company would have had different arrangements. I
• 1:41
  Speaker 2: think what the EA is trying to show is that
• 1:44
  Speaker 2: the prices that were offered were reasonable given the AX curve.
• 1:50
  Speaker 2: I think that that's the main point. I just want
• 1:53
  Speaker 2: to point out that we know that those those prices
• 1:56
  Speaker 2: were higher than normal, but that's because the prices were high.
• 2:00
  Speaker 1: Okay, so we can take that. Doesn't mean necessarily, though,
• 2:04
  Speaker 1: that their businesses would have been viable, right if they
• 2:06
  Speaker 1: had taken these because it was still high power prices.
• 2:09
  Speaker 1: All we can say. We can't say that it would
• 2:11
  Speaker 1: have saved them. We can't say that it would have
• 2:13
  Speaker 1: made their businesses, as I say, viable, but we just
• 2:16
  Speaker 1: can say it was cheaper than what they were doing.
• 2:18
  Speaker 2: I think, look, all industrial users in this country know
• 2:21
  Speaker 2: that our wholesale market is volatile because we depend upon
• 2:26
  Speaker 2: intermittent renewables like wind, solar and hydro. So the prices
• 2:30
  Speaker 2: go up to very high levels and they go down
• 2:34
  Speaker 2: very low. We know from the EA report that they
• 2:36
  Speaker 2: got as low as one dollar a megawatt on the
• 2:40
  Speaker 2: first of September. So I think the point is that
• 2:44
  Speaker 2: catching is a really important risk management tool for industrial users.
• 2:51
  Speaker 2: Being underhedged can allow users to get the benefit of
• 2:55
  Speaker 2: lower prices, but it also carries the risk that when
• 2:58
  Speaker 2: those prices rise, as they did this winter, that they
• 3:02
  Speaker 2: are exposed to those prices too. And I think it's
• 3:05
  Speaker 2: really important. You know, it's a comment that Minister Brown
• 3:09
  Speaker 2: signaled in his recent government policy statement that sophisticated consumers
• 3:15
  Speaker 2: have to manage their risk appropriately given our highly volatile market.
• 3:19
  Speaker 1: I mean, bridget, Look, I guess the thing is what
• 3:22
  Speaker 1: we're arguing about is stuff on the margins, isn't it.
• 3:24
  Speaker 1: The truth of the matter is that we are no
• 3:26
  Speaker 1: longer a country where if you want to, if you
• 3:29
  Speaker 1: want to manufacture cheap stuff like this, where you can
• 3:32
  Speaker 1: do it because we're just too expensive. Isn't that the truth?
• 3:35
  Speaker 2: Look? I don't think I can. I think the main
• 3:38
  Speaker 2: comment from my perspective is that options are available to
• 3:43
  Speaker 2: help manage risk, and we know our wholesale market is
• 3:47
  Speaker 2: volatile because we've made a choice to move toward renewable
• 3:51
  Speaker 2: intermittent renewables, and that just means that we have greater volatility.
• 3:56
  Speaker 2: I think. I look at the really good report done
• 3:58
  Speaker 2: by a group called m DAG that they provided to
• 4:03
  Speaker 2: the EA last year, and you know, it's one of
• 4:06
  Speaker 2: the key points in the report is we do have
• 4:11
  Speaker 2: that volatility and hedge hedges are a really important part
• 4:15
  Speaker 2: of managing that risk.
• 4:16
  Speaker 1: Yeah, Richard, thank you so much for talking u story.
• 4:18
  Speaker 1: I really appreciate your time. That's Bridget Abinathy, who's the
• 4:20
  Speaker 1: chief executive of the Electricity Retailers Association here in New Zealand.