Unaccounted for Electricity

Author: Malcolm Souness, Director, 221b Limited
Originally published 17 May 2016

Over the weekend I found myself looking into the monthly wholesale position of electricity retailers in different parts of New Zealand. The information isn't publicly available, however Market Participants can extract this information using the Reconciliation Manager's GR-120 "Report Unaccounted for Energy" (UFE) reports (refer to Reconciliation Manager Functional Specification pg 132).

What is UFE?

UFE is the difference between energy volumes recorded at GXP level, less time of use and profiled electricity volumes, scaled by network loss factors and defined profiles to represent them at GXP level. UFE exists largely due to;
  • inability to read and report all meters at the end of each calendar month,
  • variance of actual network losses against nominal loss factors,
  • other variances affecting the accuracy of market submissions.
Each trader is allocated a share of UFE, based on their total market purchases, and a scorecard rating of the accuracy of their market submissions. UFE is allocated to Balancing Areas that the Reconciliation Manager spreads GXP volumes across to take into account load flows to ICPs not supplied by dedicated NSPs (network supply points - a network term for GXP).

What can we learn from UFE?

Trader market share by volume

The allocation of UFE serves as a proxy for wholesale purchases across a balancing area, and gives a good indication of the wholesale purchase exposure of each trader across each balancing area (and embedded network).

Volume impact on market purchases

As UFE is charged at the spot price, variance in UFE exposes the energy trader to slight volume risk. Whilst not a major driver of risk, it is worth including some reference and allocation of UFE to hedge forecast models to understand its impact on hedge cover.

Accuracy of network loss factors

Where a network has its loss factors over-stated, UFE will be negative year-round. Examples of this include networks with high penetration of advanced metering equipment.

Where a network has high seasonal demand, the UFE can be positive during months of high demand, and negative where demand is low.

The UFE trading period dataset is an essential tool for diagnosing profile errors that contribute to incorrect allocation of purchased volume.

On the Electra Network, UFE allocation is negative on one GXP, and positive on another. This results in a cost differential that is not available to non-participants. Having this information publicly available would help new retailers to design more cost reflective energy tariffs.

I had a look into one network region that had substantial negative UFE year-round. The amount of UFE may be due to either overstatement of losses, or failure of retailers to submit NHH profiled solar generation to the market as injection rather than load.

Another interesting factor is the impact on allocation of UFE to direct purchaser (industrial consumers). Where direct purchase volume swings significantly from month to month, this influences the share of UFE allocated across the remaining traders across the balancing area - making it difficult to accurately forecast or budget for UFE.