Vesting Contracts
Vesting Contracts
Vesting contracts was introduced in 2004 as a regulatory instrument to mitigate the larger generation companies from exercising their market powers.
Vesting contracts mandate a specified amount of electricity (known as the “vesting contract level”) to be hedged at a specified price (known as the “vesting contract price”), which in turn removes the incentives for generation companies to exercise their market power by withholding supply to push up the half-hourly wholesale electricity prices in the wholesale electricity market.
Vesting contracts are bilateral contracts between the generation companies and SP Services, the Market Support Services Licensee (MSSL). The MSSL passes on the contract debits/credits to the retailers, non-contestable consumers and contestable consumers who buys electricity indirectly from the wholesale electricity market through SP Services. Retailers may or may not pass on the vesting credits/debits to their customers depending on the commercial arrangement made between the retailers and their respective customers.
For more information on Vesting Contracts, please click on the following links: