Latest / Best of Business / 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 · Best of Business

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