Glossary

Electricity Act 1992, as amended from time to time. The 2001 and 2004 amendments of the Electricity Act (Electricity Amendment Act 2001 and Electricity Amendment Act 2004) relate directly to the Commission and the Rules.

Active power, measured in watts (W), is the product of the voltage and the component of current power in phase with the voltage.

The six advisory groups appointed by the Commission to assist in the development of market arrangements, and to advise on changes to the regulations and rules. The advisory groups are: wholesale market, retail market, common quality, transmission, transmission pricing, and security. In addition, a hedge market development steering group has been formed.

The system operator has contracts with generators, customers, retailers and distributors to provide ancillary services, which comprise black start, over frequency reserve, frequency keeping reserve (also known as frequency regulating reserve), instantaneous reserve and voltage support. The system operator obtains instantaneous reserve on a half-hourly basis through the market.

A provider of ancillary services.

Money voted by Parliament to fund the operations of a government department or agency.

Approved test houses ensure that metering systems are operating accurately. Class A test houses can work with all meters, Class B with only certain classes of meters.

Equipment or plant that is part of or is connected to the grid. This includes equipment or plant that is intended to be connected or that belongs to embedded generators.

A statement provided to the system operator that outlines the capability and operational limitations of assets during both normal and abnormal conditions on the grid.

A participant who owns or operates assets used for generating or conveying electricity.

The state auditor which audits the Electricity Commission’s accounts.

The location on the national grid at which Benmore power station injects electricity. Benmore is the southern end of the HVDC, and half-hourly prices at the Benmore node generally reflect the half-hourly prices across the South Island. Benmore is one of the three key reference nodes, along with Haywards and Otahuhu.

The quantity of electricity required by a purchaser. A single bid may contain a series of prices.

Certain generators have the ability to black start, meaning they can restart their generation plant with no electrical input if the system has blacked out. Generators without this capability require power from the grid to restart their generating plant.

Block dispatch allows generators to receive dispatch instructions for a group of stations to be dispatched as a block. This allows them to decide how to implement the instruction within the block to manage their hydro resources efficiently.

The Electricity Commission Board established under subpart 1 of part 15 of the Electricity Act. It is composed of six Commissioners, being an executive chair, and five members, who have been appointed by the Minister of Energy to oversee the governance, operation and development of New Zealand’s electricity industry.

Generators and purchasers who breach the two-hour rule (see part G of the Rules for further details) can submit a bona fide physical reason report for consideration by the EGR Committee. For example a bona fide physical reason for a generator could be a “reasonably unforeseeable” loss of generating capability, and for a purchaser a “reasonably unforeseeable” loss of demand at a grid exit point.

A low-level government tax aimed at reducing greenhouse gas emissions to meet New Zealand’s international climate-change obligations.

The clearing and settlement system used by the clearing manager.

The service provider responsible for monitoring prudential security requirements and invoicing and settling electricity and ancillary service payments.

The codes of practice are those parts of the rules which cover the accuracy of metering installations, requirements for approved test houses, requirements of metering installations, data-logger requirements, requirements for data administrators and profile administration.

The review panel is appointed by the Electricity Commission to:

- Approve variations from any requirements of any codes of practice of the Rules;

- Advise the Electricity Commission on issues relating to variations to codes of practice; and

- Assist the Electricity Commission, with rule changes requiring input from the COP D5 review panel.

The internet-based system that provides pricing and trading information for the New Zealand electricity market. COMIT is available by subscription from the provider, M-co.

The internet site that provides a snapshot of the information contained on COMIT, including prices, demand and hydrology. Freely accessible at http://www.electricityinfo.co.nz

The advisory group that provides:

- advice on any common quality standards development.

- technical advice and expertise regarding system operator’s policy statement and procurement plan.

- input to the review of common quality direction.

- advice as requested on issues arising from the Commission’s oversight of the common quality arrangements and system operation.

The contract between participants and the grid owner, to connect to the grid at a point of connection.

An amount paid to generators, if they are required by the system operator to generate during a trading period when the final price is less than the generator’s offer price. The payment is calculated by the clearing manager and is payable by purchasers and the system operator.

A constraint occurs when a transmission line (or lines) reaches its maximum carrying capacity. When this occurs, the regions on either side of the constraint are considered ‘islands’ in price terms. One ‘island’ cannot supply any more electricity to the other, meaning demand has to be met by local generation plant.

An electricity user.

The electrical energy consumed by a 1,000 watt (1 kilowatt) appliance in an hour is one kilowatt-hour (kWh). A kilowatt-hour is also known as a ‘unit of electricity’ and is the unit in which retail sales of electricity are measured.

A government-owned organisation directly accountable to the government of the day.

A person who has agreed to purchase electricity from a retailer at a specific installation control point (ICP) e.g. a domestic consumer.

Since the introduction of retail competition to the New Zealand electricity market, customers have been able to choose their electricity supplier. "Statistics":/opdev/retail/regstats on the number of customers who switch supplier are published each month.

Data administrators gather all metering information, prepare estimates for half-hour metering data, and aggregate metering data for reconciliation.

Failure of a purchaser to pay for electricity purchased in cleared funds by 16:00 hours on the 20th day of the calendar month following the billing period. In the event of a default the money that is unpaid is pro-rated among generators.

An initiative that encourages or facilitates electricity consumers to modify their usage in a way that reduces consumption in a specific time period or shifts consumption from one time period to another.

Purchasers of electricity.

A consumer that purchases electricity from the wholesale (‘spot’) market for its own consumption, or a consumer with a grid connection e.g. a large industrial user.

An instruction issued by the system operator to generators and ancillary service agents in accordance with the dispatch schedule.

The system operator has the objective of ensuring that generation meets demand at least cost to purchasers.

Dispatch prices are forecast prices calculated in the four hours before dispatch takes place. Dispatch prices are produced in the schedule of dispatch prices and quantities (SDPQ) and are more accurate than prices from the pre dispatch schedule (PDS).

The schedule which the system operator bases dispatch instructions on to achieve the dispatch objective.

A company that owns or operates the power lines that transport electricity on local low voltage networks.

Users of electricity for personal, domestic or household use. This does not include users who purchase electricity for re-supply, or for use in production or manufacture.

By March each year, the system operator is required to submit to the board a draft policy statement. This sets out the policies and means that the system operator will observe in complying with its principal performance obligations.

By 1 June each year, the system operator must submit to the board a draft procurement plan for ancillary services.

The Electricity Governance Rules Committee (or EGR Committee) is a committee of the Board of the Electricity Commission set up to make decisions in respect of the administration of the Electricity Governance Rules. The EGR Committee contains 2 of the members of the full Commission Board. In particular, the EGR Committee oversees the running of the Commission rule breach investigation and prosecution functions and also considers minor rule changes and applications by market participants for exemptions from the rules.

The Act, as amended by later Acts, that regulates the New Zealand electricity industry, and under which the Commission operates.

Enacted October 2004, it added to and clarified the Commission’s responsibilities and authorities. The changes were part of a package of government policy announcements made at the time the Commission was formed.

The Electricity Gas and Complaints Commission is a separate organisation from the Electricity Commission. It provides consumers with a free and independent dispute resolution service for complaints about their electricity lines or retail company.
Contact the Electricity Gas and Complaints Commission on:

- phone 0800 22 33 40

- fax 0800 22 33 47

- email: "info@egcomplaints.co.nz", mailto:info@egcomplaints.co.nz.

- website:"www.egcomplaints.co.nz ":http://www.egcomplaints.co.nz.

The Electricity Commission established under subpart 1 of part 15 of the Electricity Act, also known as the Commission. The Commission is composed of six members appointed by the Minister of Energy to oversee the governance, operation and development of the New Zealand electricity industry.

The Electricity Governance Regulations 2003 and the Electricity Governance Rules 2003 under which the electricity market has operated since 1 March 2004.

- The Regulations include provisions related to service provider agreements, undesirable trading situations, rules breaches and exemptions, the proceedings of the Rulings Panel, and appeals from decisions by the Commission or the Rulings Panel.

- The Rules set out various authorities and responsibilities of the Commission to carry out market and system governance functions, as well as to make a number of decisions relating to Transpower and the transmission grid (part F of the Rules). These rules (parts A, C, D, E, G, H, and I) were approved by the Minister of Energy on 18 December 2003, and took effect on1 March 2004. Part F, dealing with transmission issues only, came into force in May 2004.

The organisation that represents the interests of the electricity lines companies (also referred to as distributors).

Generation that is connected to a local network rather than to the national grid.

The M-co subsidiary that is currently the clearing manager for the Electricity Commission.

Energy Market Services is the reconciliation manager. The reconciliation manager facilitates the monthly reconciliation process, and is responsible for reconciling metering data against a register of contracts and passing the data to participants.

A type of instantaneous reserve that is available within six seconds of an unexpected generator or transmission outage. Instantaneous reserve is procured based on the size of the single largest contingent event that could occur during a particular trading period. Generators offer instantaneous reserves at the same time as they make energy offers.

Final prices are calculated the day after physical dispatch and are normally published by 12pm that day. They are used for monthly settlement. Final prices are available at http://www.electricityinfo.co.nz/comitFta/media_releases.home

A financial risk management product that protects against price risks arising from transmission losses and constraints.

Forecast prices are calculated from the pre dispatch schedule (PDS) up to 35 hours ahead of the start of any half-hour period and every two hours from then until the start of the specific trading period.

The frequency of the New Zealand grid is normally maintained at 50 Hertz frequency and is the number of cycles per second.

An ancillary service that keeps the frequency of the grid within its normal band. The frequency keeping station increases or decreases generation within a set band to ensure that supply equals demand on a second by second basis.

A company that generates electricity connected to the grid or a local network.

One gigawatt hour is equal to one million kilowatt hours. New Zealand’s annual demand is approximately 38,000 GWh.

The government’s aspirations and expectations for the energy sector, spelled out in the case of the Commission in the Government Policy Statement on electricity governance (GPS).

A document that specifies the Minister of Energy’s sets of objectives and outcomes the government wants the Commission to give effect to in relation to the governance of the electricity industry, and against which the Commission must report and be examined accordingly. The Commission is required to operate in a manner that is consistent with the GPS, which outlines the government's expectations for the effective operation of the electricity market and identifies three priority areas:

- security of supply and reserve generation

- priority investment in the transmission grid

- hedge-market arrangements and demand-side participation.

The high-voltage electricity transmission network, which transmits electricity throughout New Zealand over more than 12,000km of transmission lines, from generators to distributors and major industrial users. It is also referred to as the national grid, and it is owned by state-owned enterprise Transpower.

A grid emergency occurs when the system operator’s ability to meet its principal performance objective (PPO) obligations is at risk, equipment or people are at risk, or the system operator has to take urgent action to restore the PPOs.

A point of connection where electricity flows out of the national grid to local networks or direct consumers.

A point of connection where electricity flows into the national grid from generating stations.

Primarily state-owned enterprise Transpower, the owner of the high voltage transmission grid, also referred to as the national grid.

Plan to upgrade the high-voltage transmission network, or national grid that transmits electricity throughout the country.

The location on the national grid at which the HVDC is connected to the North Island. Prices at the Haywards node, located in the Hutt Valley, give a good indication of prices across the lower half of the North Island. Haywards is one of the three key reference nodes, along with Benmore and Otahuhu.

A financial risk management product or contract for sale and purchase of electricity that protects against price risks associated with the spot price of electricity. It sets a price at which a buyer will purchase a specific quantity of electricity at a specified node for a set period. The buyer pays this price regardless of whether the market price is higher or lower that the set price. They are also known as contracts for differences (CFDs).

A market through which hedge contracts are bought and sold. The Commission is developing a more transparent and liquid hedge market.

The advisory group that:

- provides advice to the Commission on the development and implementation of a transparent and liquid electricity hedge market;

- provides comment as necessary to advisory groups whose work impacts on the operation of the electricity hedge market;

- considers and develops products, rules, and information technology needed to create such markets or financial products.

The high voltage transmission cable that transports electricity in both directions between the North and South Islands from Haywards substation and Benmore substation.

A unique identifier for a point of electricity connection for reconciliation purposes.

During the reconciliation process, the incumbent retailer for each local network is allocated the quantity of electricity that is not able to be directly allocated to independent retailers.

Any retailer trading on a particular local network grid exit point (except an incumbent retailer).

An infeasibility occurs when the scheduling pricing and dispatch (SPD) model cannot produce a solution that is physically feasible. When this occurs, the SPD model flags the infeasible solutions and the system operator reconfigures the input information.

The software system required by the rules to transfer information between participants, especially the uploading of bids and offers.

A point of connection on a local network or an embedded network which the distributor nominates as the point at which a retailer will be deemed to supply electricity to a consumer.

Generation capacity that is made available to be used in the event of a sudden failure of a generating or transmission facility in order to maintain system frequency at 50 Hz. Fast instantaneous reserve is available within six seconds and must be able to operate for one minute. Sustained instantaneous reserve is available within 60 seconds and must be available for 15 minutes.

Generation for which the source is intermittent and not easily predicted e.g. wind or wave generation.

A type of instantaneous reserve that is provided by load that can be quickly disconnected, e.g. hot water heating.

Jade is the service provider to the Commission that manages the registry database. The registry database shows which retailer supplies each ICP so that the electricity that energy between retailers can be reconciled. The registry also informs a retailer if one of its consumers has switched supplier.

A kilowatt-hour is also known as a unit of electricity and is the basis of retail sales of electricity.

A charge on an industry or consumers to fund a specific service or set or services. The Commission is funded by levies on the electricity industry.

A company that owns the lines which transport electricity on local low-voltage networks (also called distribution companies or distributors).

The lines and substations used by distributors to transport electricity from grid exit points (GXPs) to points of connection with consumers.

As electricity travels through the national grid, a proportion of energy is lost as heat due to the resistance in the lines. The greater the distance the electricity travels and the lower the voltage of the line, the higher the losses are.

M-co, the Marketplace Company, currently fills the service provider roles of pricing manager and COMIT provider. Its subsidiary Energy Clearing House is the current clearing manager.

The professional lobby group that represents major electricity users.

The service provider that provides a number of operational and administrative services to the market under the wholesale and retail sections (D,E,G and H) of the rules.

One megawatt hour is equal to 1,000 kilowatt hours. Megawatt hours are the metering standard unit for the wholesale market.

Equipment that measures electricity quantity in kilowatt hours.

The agreement that, until 1 March 2004, governed all aspects of the metering and reconciliation process under bilateral trading arrangements.

The agreement that, until 1 March 2004, governed all aspects of the metering and reconciliation process under bi-lateral trading arrangements.

The must run dispatch auction allows a generator to bid for the right to offer generation at zero price to ensure it is dispatched. The auction typically runs during periods of low demand (e.g. Christmas day) when generators need to run their plant to fulfil contractural obligations, comply with legal obligations or for cost reasons.

The transmission network that transports high-voltage electricity from the major power stations to the local distribution networks operated by lines companies. It is also known as the grid and is owned by state-owned enterprise, Transpower.

The grid, a local network or an embedded network.

In New Zealand the nodal price is calculated for approximately 244 market nodes, in addition to over 200 transfer nodes. Nodal pricing is the concept that the price at a particular node represents the marginal cost of supplying electricity at that node.

A point on the national grid where electricity either enters or exits the grid (a grid injection point or a grid exit point) or flows through (a transfer node).

The multi-party trading arrangement under which, until 1st March 2004, the majority of New Zealand’s wholesale electricity was bought and sold.

An offer to sell a quantity of electricity at a specified price.

The stack generated by ranking, in price order, all the offers to sell electricity.

A year in which there is a hydro drought of the severity that can be expected to occur every 60 years. The duration and timing of such an event will determine whether it has implications for security of supply.

Prices at the Otahuhu node are used as an indicator of prices in the upper North Island. Otahuhu is one of the three key reference nodes along with Haywards and Benmore.

An ancillary service that automatically reduces the level of injection from a generating set to stop an unplanned rise in the frequency.

Participants as defined under the Regulations, who engage with the Commission include the following groups:

- electricity retailers

- electricity distributors

- electricity generators

- line owners

- electricity consumers connected directly to the grid

- people who purchase electricity from the clearing manager

- service providers

- metering equipment owners

- ancillary service agents

- data administrators

- payee generators, ancillary service agents, and the system operator in relation to payment for ancillary service administrative costs.

Generators, ancillary service agents, and the system operator in relation to payment for ancillary service administrative costs.

Any participants who purchase electricity from the clearing manager or who pay for ancillary services.

This schedule is produced by the system operator, and includes expected levels of generation, instantaneous reserves, demand and forecast energy and reserve prices. If produced before 13:00 hours, the PDS covers the remaining trading periods of the day. If produced after 13:00 hours, it covers the remaining trading periods of the day and the trading periods of the following day.

The New Zealand electricity market uses four types of prices – forecast, dispatch, final and real-time prices.

The service provider responsible for calculating and publishing final prices.

The principal objective of the Electricity Act 1992, as amended, is to ensure that electricity is generated, produced and delivered to all classes of consumers in an efficient, fair, reliable and environmentally sustainable manner. The Commission is committed to this objective and is also required to promote and facilitate the efficient use of electricity.

Profiling allows retailers to estimate how much electricity any consumer will use in each half hour by providing a typical consumption 'shape'.

When there is a metering, SCADA or infeasibility situation that cannot be resolved by 10am, provisional prices are published instead of final prices. The pricing manager then has two days to publish the final prices.

Electricity can be consumed up to 50 days before payment for it is due. As a result, each purchaser is required to provide ‘prudential security’, most commonly in the form of cash or a letter of credit, to cover the risk of not paying for this electricity on the due date. This ensures that generators are paid, even if a purchaser defaults. To ensure that sufficient security is held, the clearing manager monitors current and projected exposure on a weekly basis using bids, cleared offers and final prices.

A company that buys electricity from the wholesale (‘spot’) market.

Reactive power is the product of the voltage, current and the sine of the phase angle, and is measured in kiloVolt-Amps reactive (kVAr).

The price of wholesale electricity calculated for every five-minute period through each day.

The process of matching the electricity supplied to customers by individual retailers with actual demand at a grid exit point.

The reconciliation manager facilitates the monthly reconciliation process and is responsible for reconciling metering data against a register of contracts and passing the data to participants.

The three reference nodes are Benmore, Haywards and Otahuhu. Prices vary throughout the country so the prices at these nodes are considered indicative of electricity prices for the South Island, the lower North Island and the upper North Island respectively.

The database that identifies every point of electricity connection using an installation control point (ICP) reference, enabling energy flows between retailers to be reconciled. The registry also informs retailers when a customer switches supplier.

The Electricity Governance Regulations 2003, as amended from time to time in accordance with the Electricity Act 1992.

Spare generating capacity or load reductions used to recover frequency immediately following a sudden generation or transmission line outage.

The advisory group that:

- considers and develops rule change proposals affecting Parts B, D and E of the rulebook; and

- provides comment as necessary to advisory groups whose work impacts on the operation of the retail market.

A company that sells electricity to customers.

A rule breach occurs when a participant fails to meet its obligations under the Electricity Governance Regulations and Rules.

Electricity Governance Rules as amended from time to time in accordance with the Electricity Act 1992 (including code of practice and technical code).

The Rulings Panel deals with formal complaints of breaches of the Electricity Governance Regulations and Rules by participants in the market that are referred to it by the Electricity Commission. If it upholds a complaint, it has a number of options available including imposing penalties against participants, awarding costs or compensation, issuing suspension or termination orders, and recommending rule changes. It also determines certain disputes between participants and can hear appeals on specific decisions made by the system operator.

The scheduling, pricing and dispatch software used by the system operator and the pricing manager.

The advisory group that provides advice to the Commission about how it may use reasonable endeavours to ensure security of supply in a one-in-60 dry year, without assuming a demand reduction from emergency campaigns, while minimising distortions to the normal operation of the electricity market; and alternative mechanisms to provide security of supply.

The Commission contracts a number of service providers who operate under individual contracts as agreed with the Commission. Service providers currently contracted are:

- system operator

- reconciliation manager

- market administrator

- information system provider

- clearing manager

- pricing manager

- registry.

Settlement occurs on the 20th day of the month after trading occurred. The clearing manager operates a clearing house, paying generators in full once all monies are received in cleared funds from purchasers.

The buying and selling of wholesale electricity is done via a ‘pool’, where electricity generators offer electricity to the market and retailers bid to buy the electricity. This market is called the spot or physical wholesale market.

The half-hour price of wholesale (‘spot’) market electricity published by the pricing manager.

The guiding document for a public sector body outlining its objectives performance targets, and means of delivery against government policy.

The Commission is required to publish a statement of opportunities (SOO) to enable the identification of potential opportunities for efficient management of the grid, including investment in upgrades and investment in transmission alternatives.

Station dispatch allows generators to receive dispatch instructions for an entire station rather than by unit, enabling them to manage unit loadings individually to achieve more efficient operation of the plant.

The systems used by the system operator to collect and display information on how the system is operating on a moment-by-moment basis.

The Board has delegated day-to-day responsibility for the administration of surveillance and compliance issues to Market Governance (MG) team of the Commission. The MG team reports to the EGR Committee and the Board.
MG team is usually the first point of contact to discuss any compliance-related matter, including allegations of breaches.

Service provider responsible for scheduling and dispatching electricity, in a manner that avoids fluctuations in frequency or disruption of supply.
The system operator is currently Transpower.

The organisation that represents the interests of the electricity lines companies.

The advisory group that:

- considers and develops rule change proposals affecting Part F of the rulebook as determined by the workplan, including input to the grid investment test, grid reliability standards, gird planning assumptions, Statements of Opportunities, transmission alternatives and the transmission pricing methodology; and

- provides comment as necessary to advisory groups whose work impacts on transmission.

The advisory group that:

- provides advice on the transmission pricing methodology proposed by Transpower;

- considers and develops rule change proposals affecting sections IV and V of part F of the rulebook as determined by the workplan; and

- provides comment as necessary to advisory groups whose work impacts on transmission pricing issues.

The state-owned enterprise which owns the high-voltage transmission network (the national grid) and is the system operator.

The two-hour rule means that, without good reason, a generator or purchaser cannot alter a bid or offer within two hours of the electricity being dispatched.

An undesirable trading situation (UTS) arises when there is a threat to orderly trading or settlement that cannot be resolved under the rules. The Commission is able to investigate any potential UTS and can take any action it considers appropriate, including suspending rule requirements and imposing new requirements on participants.

Agreements that cover retailers’ arrangements with distribution companies for local electricity distribution services.

The ancillary service that injects reactive power into the system to boost voltage at the point of injection.

The monthly procedure that revises an invoice where the information it was calculated on has been amended.

The advisory group that:

- considers and develops rule change proposals affecting part G (trading, pricing, dispatch, wholesale reconciliation) and part H (settlement and security rules) of the rulebook as determined by the workplan

- provides comment as necessary to advisory groups whose work impacts on the operation of the wholesale market.

The workplan and work programme set out the Commission’s intentions regarding strategy, capability and performance (over the next three years), prioritised to meet policy objectives in the 2004/05 financial year.

The categories into which the Commission has divided its main functions, namely:

- market operations (wholesale and retail markets, system operation and common quality);

- policy and market design (development of market rules to enhance competition in wholesale and retail markets);

- reserve energy (including generation and demand-side options);

- transmission (benchmark contracts, grid reliability standards, pricing methodology, approval (or not) of new gird investments and facilitation of alternatives to transmission);

- supply and demand modelling and forecasting; and

- electricity efficiency.