Responding to matters set out in Reviewing risk management options for electricity retailers – issues paper

The report by Toby Stevenson, Dr Stephen Batstone and Kieran Murray analyses the Electricity Authority’s issues paper Reviewing risk options for electricity retailers, focusing on the thin market for shaped hedge contracts and potential competition concerns.

While scarcity is a key driver, the Authority examines whether market power influenced pricing. It finds OTC baseload and peak hedge prices likely competitive but cannot determine if super-peak hedge prices reflect competition. The lack of investment in peak capacity over a decade is central to pricing issues. The report warns against intervention, suggesting investment in demand flexibility and batteries will improve market liquidity.