2nd February 2006 – NEMMCO’s forecast from 17th January

The following graphic illustrates what NEMMCO had forecast (at Tuesday 17th January, before their update on 23rd January had been released) for date noted above:

(please click on the image for a better view)

Please note the following in the above image:

(a) This forecast has not changed markedly in more than 6 weeks, which is a cause for concern.

(b) Even more of a concern is the fact that an LOR3 alert level has been signalled by NEMMCO for the peak demand periods of the day:

LOR3 is more dire than LOR2 and means that there is insufficient generation capacity being made available (in SA and VIC in this case) to meet peak demand – in other words, if an extreme demand day eventuates, load shedding will be necessary.

(c) It can be seen from this diagram that the market is pricing in a tight supply/demand balance in the futures prices for the current quarter (especially the peak prices).  However, we are still investigating whether the peak price contracts referenced (a low of $72.75 in Queensland to a high of $89 in South Australia) reflect what may actually eventuate in the spot market, given the numerous days this quarter when low reserve conditions are currently forecast.

About the Author

Paul McArdle
One of three founders of Global-Roam back in 2000, Paul has been CEO of the company since that time. As an author on WattClarity, Paul's focus has been to help make the electricity market more understandable.

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