Significant Price Event Report

Gas Day:21 June 2007

VENCorp

October 2007

Authorised by VENCorp Level 2, YarraTower, World Trade Centre, Melbourne 3005

Significant Price Event Report – 21 June 2007

Table of Contents

1Introduction

2Summary of Results

3Detail of Events Across The Day

3.1Gas day 21 June 2007 – Beginning Of Day

3.210am Schedule

3.32pm Schedule

3.46pm Schedule

3.510pm Schedule

4Conclusions

Appendix 1: LNG Bids for Origin and AGL

Appendix 2: Total Market Uplift Settlements by Type

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Significant Price Event Report – 21 June 2007

Significant Price Event Report

21 June 2007

1Introduction

VENcorp is required to monitor daily trading activity within the market to ensure such trading is in accordance with the MSO Rules and to identify any significant market events in and between trading intervals. This report provides an explanation of the events for 21 June 2007.

2Summary of Results

Significant price and settlement variations occurred gas day 21 June 2007. This dayis considered significant due to the volatile market price and the large ancillary payments that occurred in particular schedules on the day. Ancillary payments of -$1.2M occurred on the day and Schedule 1 had AP payments of $10.3M

The wholesale spot market prices and ancillary payments for gas on this day areshown in Figure 1.

Payment Type / Gas Day / Schedule
1
$/GJ / Schedule
2
$/GJ / Schedule
3
$/GJ / Schedule
4
$/GJ / Schedule
5
$/GJ
Market Price / 21/06/07 / $35.49/GJ / $3.93/GJ / $3.51/GJ / $3.92/GJ / $3.92/GJ
Ancillary Payment / 21/06/07 / $10,336,810 / -$4,792,335 / -$6,727,710 / -$193 / $0

Figure1: Price and Ancillary Information

The following summarises the events during the day.

At the start of the day,

  • cold temperatures were forecast by the Bureau of Meteorology (BOM);
  • Market participants’ (MPs) demand forecasts were high with 138TJ of forecast gas fired power generation;
  • VENCorp overrode and increased MPs’ demand forecasts;
  • Market price was high at $35.49/GJ; and
  • 36TJ of LNG was scheduled (including 5TJ scheduled in merit order) causing $10.3M of ancillary payments.

As the gas day progressed,

  • weather turned out to be warmer than forecast and the BOM continued to revise the temperature forecasts higher;
  • MPs revised and reduced the demand forecasts;
  • VENCorp removed the demand overrides in the 6am schedule;
  • LNG was scheduled down then called off in the 10am and 2pm schedules causing large negative ancillary payments;
  • market prices fell to between $3.51/GJ - $3.93/GJ (see Figure 4 for injection bid stacks); and
  • there were no changes in the injection bids across the schedules.

At the 10pm schedule,

  • MPs did not change their demand forecasts;
  • VENCorp slightly revised MPs demand forecasts up by 6TJ but LNG was not required to meet the extra demand.

At the end of the gas day,

  • the total actual withdrawals were 1,183TJ and 6TJ higher than the 10pm scheduled quantity (see Figure 3 for MPs’ demand forecasts and the price for each schedule);
  • gas was scheduled and withdrawn at VicHub;
  • the total actual injections were 1,163TJ (including 4.6TJ of LNG) and 10.4TJ higher than the 10pm scheduled quantity (see Table 2 for the comparison between actual and scheduled injections); and
  • the end-of-day (EOD) linepack was 309TJ and lower than the beginning-of-day (BOD) linepack of 323TJ.

Appendix 1 contains the LNG bid stacks for AGL and Origin

Appendix 2 contains the total uplift settlements for the market by type of payment (congestion, surprise or common).

Figure 2: Supply Source Actual versus Scheduled Injections[1]

Figure 3: Demand Forecast (including VENcorp override) versus Price

Figure 4: Bid Stacks for Each Schedule

3Detail of Events Across The Day

3.1Gas day 21 June 2007– Beginning Of Day

Gas day 21 June 2007 started with linepack a little above target (approx. 323 TJ),plus ademand forecast[2] of 1215 TJ (including approximately 131TJ of Gas Fired Generation Forecast Demand).

VENCorp override 6am schedule and added 35 TJ.

To satisfy this demand,1227TJ offers of gas from supply points at Longford, VicHub, Iona (underground storage), SEAgas, BassGas, were scheduled in the pricing schedule.

There were no scheduled controllable withdrawals at this schedule.

Due to the peakiness of the weather and demand forecast, 36TJ of LNG was scheduled (3 TJ/hr from 10am to 11pm), incurring the ancillary payments in this schedule.

Market Price was $35.49 and was set by anIona injection bid.

Figure 5: 6am Scheduled Demand and Forecast Temperature

3.210am Schedule

At the 10am schedule, the participant demand was 1197 TJ due to the actual weather being 1-2 degrees above forecast and actuals therefore being lower than the demand forecast. Additionally, the BOM weather forecast had increased the temperature forecast between 1-2 degrees above the 6am forecast for the period between 10am and 2pm.

Figure 6contains the actual and forecast demands and temperatures as at the 10am schedule.

This schedule had the total daily demand override reduced to zero but there were some adjustments to the hourly forecast, increasing demand in the peak hours and reducing the overnight hourly demand.

Scheduled injections droppedsubstantially by65 TJ to 1162 TJ and the LNG needed was reduced to 30 TJ (3 TJ/hr for 10 hours starting from 12pm). This reduction in LNG scheduling resulted inthe negative ancillary payments.

By 12pm the actual temperature was increasing even further above forecast (see Figure 6) and an adhoc schedule reduced total injections further to be 1145 TJ and the LNG scheduled injections decreased to 24 TJ - causing even further negative ancillary payments.

There wereno scheduled controllable withdrawals in this schedule.

The actual withdrawals (demand) were now running slightly behind the forecast due to the temperature being higher than the previous forecast.

Market price was $3.93 and was set by an Iona injection bid.

Figure 6: 10am Schedule Actual versus Forecast Status

3.32pm Schedule

At the 2pm schedule, participant demand forecast decreased to 1170 TJ (inclusive of the available operational actual withdrawals up this time),

The VENcorp override was now taken out of the schedule completely, even the re-sculpting.

Scheduled injections stabilised at levels similar to the adhoc schedule at 12pm (1143TJ)and this reduction in peak demand caused all of the LNG to be un-scheduled, resulting in a further negative ancillary payment.

There was 0.6 TJ of scheduled withdrawals in this schedule.

The market price for this schedule, was set at $3.51and was set by an Iona withdrawal bid.

Figure 7: 2pm Actual versus Forecast status

3.46pm Schedule

The participant demand forecast at 6pm stabilised to similar levels as the 2pm schedule at 1170 TJ.

A small re-sculpting demand override occurred for the hour between 6pm - 7pm (adding 3 TJ onto this hour and reducing hour 9pm-10pm by 2 TJ), leaving an overall addition of 1 TJ.

Scheduled injections increased to 1152 TJ – but no LNG was scheduled.

There was a very small amount of controllable withdrawals in this schedule (0.2 TJ)

The market price was set at $3.92 by and VicHub injection bid.

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Figure 8: 6pm Actual versus Forecast Status

3.510pm Schedule

The participant’s demand forecast reduced to 1171 TJ.

VENcorp overrode this forecast by 6 TJ, increasing it to 1177 TJ.

Figure 9 shows the demand and temperature actuals and forecast at the 10pm schedule.

Scheduled injections stabilised at 1152 TJ and no injections of LNG were required.

The market price stayed at $3.92 and was set by a VicHub injection bid.

Figure 9: 10pm Forecast Demand and VENcorp Override

The EOD day linepack was 309 TJ –slightly over the 300 TJ target (but within acceptable range).

Actual injections for the day were 1163TJ and actual withdrawals were 1183 TJ[3].

4Conclusions

The following points are noted regarding the 21 June 2007:

  • The temperature forecast, began much lower at the start of the day, and was gradually increased as the actual temperature increased through the day. This meant that LNG was scheduled initially and progressively reduced ahead of it actually flowing and finally was no longer needed.
  • This resulted in a very high ancillary payment in the 6am schedule, which was progressively clawed back over the remaining schedules of the day.

Appendix 1: LNG Bids for Origin and AGL

Appendix 2: Total Market Uplift Settlements by Type

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VEN_DOCS-#225751-v1-Significant_Price_Events_Report_for_21_June_2007_Public_Version.DOC

[1] LNG actual injections are Gasnet maintenance vaporising and are not usually scheduled. This is the reason for the 4.58 TJ actual injections without any scheduled amount included for LNG.

[2]Unless otherwise stated, the demand forecast refers to the forecast given to VENcorp by participants and includes any gas fired generation forecast. It is not the VENcorp system demand forecast.

[3] Discrepancies up to 6-8 TJ in the Energy Balance (Injections + BoD linepack = Withdrawals + EoD linepack) can be caused by heating value differences, nodal pressure extrapolations error and instrumentation (pressure transducers) error.