Wholesale Pricing Model

‚ÄčAs Tasmania is connected to the Victorian region of the NEM via Basslink, Tasmanian spot prices are usually closely related to Victorian spot prices, with differences reflecting the cost of transport between the regions and the average direction of flow (i.e. whether Tasmania is on average a net energy exporter or importer with respect to Victoria). Only where transmission constraints apply do spot prices between the two regions diverge significantly. The relationship between the two regions is evident in historical spot prices.

A 'rules-based' methodology that reflects the broad expected relationship between Victorian and Tasmanian prices has been developed to produce the prices for Hydro Tasmania's regulated contract products.

The methodology uses published Victorian forward contract prices as the starting variable and makes a number of transparent adjustments to translate these values into Tasmanian contract prices - taking into account expected net energy exports between Tasmania and Victoria. The prices for regulated Tasmanian cap products are based on a discounted new entry cost calculation for generic peaking plant.

The rules-based methodology is outlined in Part 3 of the Regulatory Instrument and is represented in the diagram below:

A more detailed, step-by-step overview of the pricing methodology is included in Appendix 2 of the Department of Treasury and Finance's Wholesale Framework Guide.

A copy of the audited model is available on the Hydro Tasmania website, see here. The model gives effect to the approved pricing methodology and enables the prices for regulated Tasmanian contract prices to be determined.

Details of the wholesale regulated contract weekly offer process are also included in the Electricity Wholesale Contracting Guideline.
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