Power buyers on the spot
Consumers who have been saving money by buying electricity at spot prices could see the tables turned as South Island lakes levels drop.
Consumer NZ chief executive Sue Chetwin said she didn’t think there was a reason to panic, but now was probably a good time for people who had been buying electricity at spot prices to make sure they understood the risks.
‘‘While it hasn’t got hugely expensive, they will be noticing that electricity in the middle of the night is not nearly as cheap as it was a few weeks ago.’’
Wholesale electricity prices are rising and regularly breaking through 10 cents a kilowatt hour as concern emerges over depleted hydro lake levels in the South Island and the risk of a ‘‘dry winter’’.
The wholesale price of electricity briefly spiked above 50c/kWh on Monday in the upper South Island.
National grid operator Transpower has put South Island lake levels on ‘‘watch’’ after they dropped to 53 per cent of capacity – which is just below the bottom of the band that it considers normal for this time of year.
Levels are not yet low enough to trigger an ‘‘alert’’ or an emergency.
Transpower currently assesses the chances of an actual shortage of hydro capacity that could stop the turbines at less than 2 per cent.
Electricity Authority chief executive Carl Hansen said it was taking ‘‘prudent action’’ by more closely monitoring the situation.
‘‘Consumers do not need to be concerned at this stage,’’ he said.
Flick Electric is a retailer that has all its customers on spot plans. Chief executive Steve O’Connor said prices were rising, but last week customers would still have saved 15 per cent on average by buying on the spot market.
‘‘If we don’t get [lake] inflows we will probably see prices lift a little bit more.’’
Overall, wholesale prices in May had averaged out cheaper than in previous years at 6.5c/kWH, he said.
Because wholesale charges comprised only a quarter of the bill, it would take an ‘‘awful big move’’ in spot prices for customers to be worse off, he said.
‘‘There is a quite a bit of margin for our customers on spot still left.’’
O’Connor said he could not identify the wholesale price at which customers would be better off on standard electricity plans, as that was ‘‘different for different types of customer’’.
Hansen said inflows into North Island lakes had been strong and the market could still call on substantial spare thermal generating capacity to conserve hydro lake levels if necessary.
‘‘We’ve seen the industry successfully manage an extremely dry period in 2012 without any problems for consumers and we fully expect them to do it again,’’ he said.
‘‘Meridian obtained consents in September 2012 that has given it access to significant additional hydro storage if the system operator triggers a national savings campaign.
‘‘The current hydro lake levels are far from that situation,’’ Hansen said.
Electricity companies had not added any new generating capacity to the grid over the last year, he confirmed.
"If we don't get [lake] inflows we will probably see prices lift a little bit more."