Industry Submissions
Industry Submissions
Mon 23 Oct 2006
Industry submissions of particular relevance to the energy industry, including information on energy reform, financial services reform and other items of interest.
The following submissions to the NSW Treasury, Australian Energy Markets Commission (AEMC) and Energy Reform Implementation Group (ERIG) explain how existing electricity futures market and clearing infrastructure could be used to achieve industry-wide efficiency gains in the National Electricity Market (NEM).
NSW Sale of Electricity Businesses: Eliminating Credit Default Risk
This proposal provides NSW Treasury with a solution that eliminates credit default risk associated with existing electricity OTC hedge contracts via the sale of NSW electricity businesses.
The paper provides an overview of;
1. the EFP mechanism
2. the steps to be taken to effect the transfer of OTC contract positions to futures contracts; and
3. a detailed example of the transfer process with a cash flow and costs analysis.
Futures Offset Arrangements (FOAs) as an alternative to the NEMMCO Reallocation Derivative Market
Two recent submissions to the AEMC by 20 industry participants and the Australian Securities Exchange (ASX) request that FOAs be incorporated in the National Electricity Rules to provide a practical alternative to the NEMMCO Reallocation Derivative Market. These submissions document the economic, competition and prudential risk management benefits of rule changes to support the use NEM Participants (Retailers) futures cash flows to reduce their spot market (MCL) funding costs.
Central Counter-Party (CCP) Clearing & Settlement Services
- A common CCP service for Spot & Financial Electricity Markets
The ASX submission to the ERIG summarises how central counter-party clearing and settlement infrastructure (currently utilised for electricity futures and trades negotiated in the OTC markets) could lower the risks and costs of the current lengthy settlement cycle underpinning the spot market operated by NEMMCO.