Wholesale Pricing - History and Overview
History of Wholesale Price Regulation
Section 43G of the ESI Act provides for a range of approvals to be made in relation to the wholesale regulatory framework, including the types of regulated contracts that must be offered, the methodology for pricing these contracts and the volume that must be made available to retailers by Hydro Tasmania.
Section 43O of the ESI Act provides for the responsible Minister (at the time, the Minister for Finance) to make the initial approvals under section 43G, as if the Minister were the Regulator, within six months of Division 4A of Part 3 of the ESI Act commencing (as this Division commenced on 1 June 2013 the Minister was permitted to make or revoke approvals until 1 December 2013). This provision was included on the basis that the Government at the time was responsible for developing the wholesale regulatory framework as part of an integrated package of reforms.
On 29 July 2013, the Minister for Finance made a Wholesale Contract Regulatory Instrument that contained the initial approvals required under section 43G of the ESI Act to enable the Regulator to use the price of the regulated load-following swap product in its initial standing offer price determination.
Given that the Minister for Finance had the capacity to make or revoke approvals under section 43G of the ESI Act until 1 December 2013, on 6 November 2013, the Minister approved a number of amendments to the Regulatory Instrument that were recommended by the Department of Treasury and Finance. These amendments were consistent with the design principles under which the wholesale regulatory framework was developed, did not change the key features of the framework and improved the clarity and operation of the Regulatory Instrument.
Since 1 January 2014, the Regulator has also been responsible for the ongoing administration of the Regulatory Instrument. Details of approvals made by the Regulator in accordance with the Regulatory Instrument are available here.
The Regulator conducted a review of the Regulatory Instrument and, in December 2016, released a new version of the Regulatory Instrument.
For an overview of the regulation of Hydro Tasmania's wholesale electricity contracts in Tasmania click here and follow links to the Regulator's Wholesale Contract Regulatory Framework Information Paper. The wholesale regulatory framework is given effect through a range of legislative and regulatory instruments, as shown in the diagram below.
Click here for relevant electricity legislation.
Wholesale contracting regulatory framework:
The wholesale contracting regulatory framework is also supported by a number of supplementary instruments. Further information is available here.
Regulated wholesale contract offer process:
Under the wholesale contracting regulatory framework, Hydro Tasmania is required to make an offer of regulated contracts each week. This offer process is set out in the Electricity Wholesale Contracting Guideline and is summarised in the table below.
* Approved Financial Risk Contracts (AFRC) include:
- Load Following Swap Contracts;
- Baseload Swap Contracts;
- Peak Period Swap Contracts; and
- Baseload $300 Cap Contracts.
** Volume scaling is a process that is applied by Hydro Tasmania in the event that the combined total of retailer nominations (see stage 2) is more than the total quantity of contracts that Hydro Tasmania is required to offer for that week.