Customers warned as power bills spike
Power retailer Flick Electric is warning new customers about soaring spot electricity prices before making the switch.
The Wellington company, which sells power at wholesale prices, also known as spot prices, is giving new customers the option to join or to hold off, until prices drop.
Chief executive Steve O’connor said the higher prices could last between three and eight weeks. Wholesale price surges occurred only once every five years.
But electricity industry commentator Bryan Leyland said the surge would have long-term effects and was likely to be repeated next winter. He said the country was experiencing a dry winter.
Electricity Authority chief executive Carl Hansen said spot prices had risen substantially since May this year, but were ‘‘not unusually high by historical standards’’.
‘‘In the last two days, when the weather has been cold, the amount of electricity the country has used has been near record levels, and much of our thermal generation was running.
‘‘These generators can only afford to run at high prices, and so the market is working by encouraging these generators to run when they are needed to meet demand.’’
O’connor said Flick customers had on average saved money for 102 weeks before wholesale prices spiked when the bad weather hit.
Customers needed to understand that wholesale energy prices fluctuated, he said.
‘‘Our model is not perfect for everyone. We are really clear on our website about the model and how it works, we are clear that at certain times, in certain situations, bills may be more expensive and this is one of those situations.
‘‘Right now we are explaining to our customers that a dry winter happens once every five years.’’
However, Leyland said if spot prices were high this year, there would be a price increase next year as well.
Prices were high because the South Island hydro lakes had not had much rain and were getting to ‘‘dangerously low’’ levels, Leyland said.
In addition, wind generation had been unusually low for the past month, he said.
It was unclear when the high spot price would drop, as it depended on when rainfall in the hydro catchments.
‘‘This usually happens in late July or early August but sometimes it has gone on longer than that.
‘‘Another uncertainty is the reliability of the big thermal generators. If one of them has a major breakdown that takes it out for several weeks, we will immediately be in a serious situation.’’
About 24,000 households have signed up to spot price power companies Flick Electric and Paua to the People.