The Electricity Commission has developed the disclosure of risk management contract information regime to provide interested parties with a mechanism for comparing key risk management contract details. The regime will address the lack of information available for the formulation of historic contract curves and allow parties to assess the competitiveness of the risk management contract market. Parties looking to enter into a risk management contract will be able to view details of historic contracts which will assist them when negotiating their own contracts.

2. Who submits contract details?

Only Participants, as defined in the Electricity Governance Rules 2003 (EGRs), are required to submit contract details. If the seller of a hedge contract is a Participant, the seller is required to submit contract details; if the buyer is a Participant they must verify that the submitted details are correct (if the buyer is not a Participant than verification is optional). If the buyer is a Participant, and the seller is not, the buyer is required to submit information. If neither the seller nor the buyer is a Participant, details of the risk management contract do NOT need to be disclosed.

A Participant must submit disclosure data no later than 5pm, 5 business days after the trade date for a CfD or options contract and 10 business days after the trade date for all other risk management contracts. Failure to comply will be considered a breach of the EGRs.

3. Why are non-Participants exempt from the disclosure regime's requirements?

The Commission has decided to omit non-Participants from the disclosure requirements a this stage because it believes the inclusion of non-Participants would result in increased compliance costs with little additional assurance around disclosure. The Commission will consider reviewing this at a later date should the number of non-Participants involved in risk management contracts rise considerably.

4. What do I need to do if I receive an email from the risk management disclosure support team?

If you are a Participant and you receive an email from the risk management disclosure support team asking you to verify information, you must respond to the email (by clicking on the one-off link at the bottom of the email) within 2 business days. Failure to comply will be considered a breach of the EGRs.

If you are a non-Participant and you receive an email from the risk management disclosure support team asking you to verify information you have the right, but not the obligation to respond to the email. If you want to verify the submitted information you can click on the link to the System at the bottom of the email you receive and verify the disclosed information.

5. What happens if I delete the email I receive before I have verified the contract information?

If you delete your verification email you can contact the WITS system administrator on 0800 426 648 (0800 4 COMIT) or cadmin@nzx.com and request that a new email be sent.

6. What happens if I click on my one-off link to the system, but don't verify the contract, then want to verify at a later date?

If you click on a one-off link which has already been activated you will be redirected to a page where you can reset the link. An additional email with a new 'one use only' link will be sent out to the same email address which the original email was sent to.

7. How do I verify a contract?

You can verify a contract by clicking the link in the verification email you receive. This will take you to the Commission's disclosure regime verification page, and display only the contracts listed in the email. Alternatively, if you have a login to the system, you can go the verification page by clicking on the verification button on the contract search page (this button will only display if there are contracts waiting to be verified). Accessing the verification page in this way will display all contracts that you have not yet verified (i.e. could show contracts from multiple emails). Once on the verification page you can click on the "Verify", "Dispute", or "No action" radio button (as appropriate) beside each contract. There are also "Verify all" and "Verify none" buttons available which are shortcuts to clicking on "Verify", or "No action" respectively for each contract. Once all the radio buttons have been set appropriately, then save your changes.

8. If I disagree with the information which has been disclosed what can I do?

If you disagree with the information that has been submitted, you can submit that the information is incorrect. You can do this by clicking on the "dispute" button next to the relevant contract on the verification page of the disclosure system.

The submitting party will receive an email informing it that the contract information has been disputed; it will then be required under the EGRs to correct the information. You will be sent another email with the corrected information which you can then verify (or chose not to verify if you are a non Participant).

9. What happens if I disagree with the corrected information?

The System will show the contract information is "disputed" until such time as the dispute is resolved. If the dispute is not resolved within 10 business days of the Participant receiving notice that the information is disputed, then the System will be updated to show the contract is subject to a long term dispute. Interested parties will be able to discount this contract from their research on contracts.

10. What happens if I verify a contract but later realise the information is incorrect?

If a contract's status is showing as verified it cannot be amended using the edit function on the system. If you wish to amend a verified contract you will need to contact the WITS administrator on 0800 426 648 (0800 4 COMIT) or cadmin@nzx.com. The administrator will delete the incorrect contract and allow you to resubmit the corrected contract information.

11. Why does the contract price on the verification page not match the price in my risk management contract?

As outlined below, the contract price on the verification page is a standardised version of the original price negotiated in your risk management contract. The contract price has been time weighted, and adjusted for both location and loss adjustment factors.

12. How do I calculate contract price?

The contract price only needs to be disclosed for physical contracts (FPVV and FPFV) and CfD contracts with terms of less than ten years.

In order to compare prices between CfDs and physical contracts Participants will be able to use a loss adjustment factor (LAF) of 0.937 for physical contracts. For contracts which exclude losses a LAF of 1 can be used.

All contracts that contain a profile will be presented as time-weighted averages. If a contract contains an adjustment clause, only the starting price needs to be disclosed.

The contract price is calculated using the following formula:

CP =

{

∑ P_i x TP_i

ⁱ⁼¹

∑ TP_i

ⁱ⁼¹

}

/ LF x LAF

Where:

CP means the contract price

n means the number of different prices within the contract

P_i means a price specified in the contract (for contracts with an adjustment clause it is a starting price)

TP_i means the number of trading periods during which each price in the contract applies

LF means the location factor for the node at which the price is set in the contract, as published by the Board in accordance with rule 5

LAF means a loss adjustment factor which is:

(a) if the contract price for the contract is referenced to a point of connection on the grid, 1; or

(b) for all other contracts, 0.937 (being the difference between 1 and the loss factor of 0.063).

The following worked examples illustrate how the contract price can be calculated:

1. A profiled CfD contract which is $60/MW at peak for 32 trading periods and $30/MW off peak for 16 trading periods. The load during peak periods is 4MW and during off peak periods is 2MW. The contract was struck at ALB0331 in Northland which has a mean location factor of 1.07. The contract price for this contract would be calculated as follows:

CP= {(32 trading periods at $60+16 trading periods at $30)/48 trading periods}/ a location factor of 1.07

CP= $46.73

2. An FPVV contract which is $72/MW at peak for 32 trading periods and $36/MW off peak for 16 trading periods. The contract was struck at WRK0331 in Edgecumbe which has a mean location factor of 1.01. The contract price for this contract would be calculated as follows:

CP= {(32 trading periods at $72 + 16 trading periods at $36)/48 trading periods}/a location factor of 1.01* an LAF of 0.937 for a physical contract

CP= $63.40

3. An FPVV contract which is $56/MW at peak for 32 trading periods only. The contract was struck at ROX1101 in Southland which has a mean location factor of 0.93. The contract price for this contract would be calculated as follows:

CP= {(32 trading periods at $56)/32 trading periods}/ a location factor of 0.93 * an LAF of 0.937 for a physical contract

CP= $64.26

13. What is a Grid Zone Area?

The purpose of the grid zone area is to protect parties' anonymity. There are five grid zone areas, three in the North Island and two in the South Island. Within each grid zone area there is a nominated node to which contracts are normalised.

Table one, below, outlines the different aggregations of locations into Grid Zone areas and displays the normalisation node for each Grid Zone area.

Table 1. Aggregated Grid Zone areas

14. What is a location factor?

The Board will publish location factors for each nominated node on the System. The location factor is the historic price ratio between the specific node and the Hayward's node for the previous 12 months. This information will be published annually on both the Commission's website and the System and will allow Participants to make the necessary adjustment to their contract price calculation.

15. What can I use the information for?

The disclosed information on contract details can be used by Participants and interested parties to create historic contracts curve (for comparison with market offers) or forward price curves. A historic contract curves should allow risk management market participants to formulate their own risk management strategies more efficiently.

Parties will be able to search the system using the following criteria: location, date range and type of contract. Parties will be able to use high level filters to omit Energyhedge contracts, contracts with clauses (for example, adjustment clauses, FM clauses, suspension clauses), disputed contracts, and contracts for other parties.

It is hoped access to contract information will increase liquidity in the hedge market and allow parties to assess the competitiveness of the market.

16. Do I need a log on to access information on the system?

Only participants who wish to edit or upload information on the system require a log on. Non-participants do not need to have a log on to access information. Similarly, participants who wish to view information, rather than upload or alter it, can do so without logging on.

17. How do I get a log on?

If you require a log on to the risk management contract information disclosure regime, please contact the WITS administrator on 0800 426 648 (0800 4 COMIT) or cadmin@nzx.com . The system administrator will issue you with a log on and a provisional password. When you log on the first time you can reset your password to a password of your choice.

18. Some of the contracts don't have price or grid zone information, why is this?

Price and grid zone area are only required fields for contract with a term of less than ten years. This exemption was deemed necessary because contracts with terms greater than ten years are the exception rather than the norm. Exempting this information from disclosure ensures the anonymity of longer term contracts. For all other contracts both of these parameters are required fields so they should be showing.

Table 2. Information required for contracts of different term lengths

19. When I download contract information some of the fields are hashed, why is this?

The hashed (####) information in the downloaded information represents confidential information, for example, party names. If you are a party to the contract you have downloaded you should be able to view all of the contract information. Please contact the WITS administrator on 0800 426 648 (0800 4 COMIT) or cadmin@nzx.com if this is not the case.

20. I have locked myself out of my account. What do I do?

For all account queries of this nature please contact the WITS administrator on 0800 426 648 (0800 4 COMIT) or cadmin@nzx.com

21. On the contract search page, what does "Exclude contracts that are with clauses" mean?

Checking this box will exclude contracts with any of the following clauses:

Adjustment clause
Force majeure clause
Suspension clause
Special credit clause
Other clauses

22. On the contract search page, what does "Exclude contracts that are for my own party" mean?

Checking this box will exclude contracts where your own party is either the buyer or the seller. NB: this option only displays if you are logged in.

23. On the contract search page, what does "Exclude contracts that are for other parties" mean?

Checking this box will only show contracts where your own party is either the buyer or the seller. NB: this option only displays if you are logged in.