EWC

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Gas and Coal Economics, page-25

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21/11/17

13:48

Post #: 28985117
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Originally posted by Skeoch ↑

Participants bid their marginal fuel costs, period. If dispatched, they earn at least that, but in any case they make the SMP. That can provide nice margins if you are low cost, and allow you to recover your investment costs over time. If you are the marginal generator, you will recover your variable costs but nothing else.

Everybody bids this way, but for those with contracts, the money they get is determined by contract and they are paid if they are available - the whole point of these financial contracts is that recovery of investment costs is obviously much more assured. If they are actually dispatched, they also of course get their fuel costs which are a pass through item for the distribution companies.

People generally like energy only markets like this because if they are competitive they will produce good results. And regulators are decent at detecting manipulation, with sophisticated programs available to detect gaming and or collusion. Market monitoring has become more vigorous ever since a serious crunch in the market a few years back, with PEMC using reputable international consultants for their annual WESM review.

The important point here is that it is really only unusual scenarios in which generators choose to run if they cannot recover their fuel costs. It does happen - for example, in Argentina a few years back there are instances of negative prices in their market - but this level of competition to run should not be expected in the WESM. Just running for the sake of running makes no sense if you are a high cost generator.

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Hi Skeoch
One would imagine that you are going to attend the AGM next week to inform Mr Elliott of his wrong doings!

If not, I hope others who do go will question him on some of the important issues you have raised over the past few weeks. And hopefully report back to us on HC.

EWC Price at posting: 23.5¢ Sentiment: Buy Disclosure: Held
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Gas and Coal Economics, page-25

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Gas and Coal Economics, page-25

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