On Feb. 7, ASX proposed changes to certain contract specifications.
ASX notified it released ASX Australian peak load electricity futures contract changes consultation paper, which outlines its changes to the contract specifications of the Australian peak load electricity futures contract (hereafter, peak load contract).
This proposal is in response to changing generation and demand profile in the national electricity market (NEM); proposed change involves changing the existing definition of the peak load profile (7am to 10pm, business days); ASX seeks feedback re proposal.
Follows ASX Feb. 2021 amended ASX 24 operating rules and procedures, see #98627.
Document dated Feb. 7, 2024, received from ASX Feb. 17, summarized Feb. 17.
Proposal Particulars
Peak load contract has been listed since 2002 and was designed to provide market participants with a mechanism to hedge their exposure to peak periods of high operational demand and prices in the NEM; there have been changes in energy sector.
ASX explained that these changes have resulted in a decrease in the effectiveness and usefulness of the peak load contract as a hedging tool for energy market participants.
This has impacted both volume as well as open interest in the peak load contract.
Specifically, the ability to hedge peak demand using the existing contract has declined due to the changing energy generation mix; proposal sets out option 1 and option 2.
Includes a discussion of potential benefits and risks of each of option 1 and option 2.
Option 1 is to amend the definition of peak lead profile to read: the periods for the invoicing of physical deliveries of electricity between 4pm and 8pm inclusive, Monday to Sunday – Australian Eastern Standard Time (AEST); option 2 proposal is per below.
Specifically, to amend the definition of peak load profile so that it reads: the periods for the invoicing of physical deliveries of electricity between 6am and 9am, and, 4pm and 8pm inclusive, Monday to Sunday – Australian Eastern Standard Time (AEST).
Proposal also sets out particulars regarding implementation of the change; ASX would give end users adequate opportunity to manage and trade out of any open positions.
Consultation Period
The comment period for this consultation closes on Mar. 22, 2024.
Sep. 2024 Consultation Results
On Sep. 30, 2024, ASX announced the results of the consultation and next steps.
Based on the feedback received, ASX will list an evening peak futures contract across all current contract regions covering the hours between 4:00pm and 9:00pm AEST.
In addition, ASX will list a separate morning peak futures contract across all regions and quarters covering the hours between 6:00am and 9:00am AEST (NEM time).
List new separate morning and evening peak load futures across each of the regions while freezing listing of further peak load quarters under existing contract codes.
Plus, ASX will remain in close contact with its market participants to determine whether there is a sufficient demand for additional contract variations going forward.
Re implementation timeline, ASX said indicative go-live timing is currently Q1 2025.
Regulators
ASX
Entity Types
B/D; Exch
Reference
RF, FS 1112.24.09, 9/30/2024; Nt 0108.24.02, CP 2/7/2024
