I’ve been travelling for the last 10 days in the USA – and for another week as well. That, and Pacific Fibre’s launch, explains a little about the paucity of posts here, but it also means I missed out on the recent news about sharply increasing energy future prices.
The sharp rise in energy futures means that we have had to increase our prices for PowerKiwi products on Powership by around 3 cents per unit in a bit under two weeks – with the prices rising for the second time on April 1st.
That’s tough to take, but it is standard for the energy component of electricity prices to rise for the winter period, as demand increases without much movement in supply. It’s also how Powershop works – charging prices related to what is happening on the market, rather than a single price for the year.
We suspect that prices may rise again this winter, albeit not as sharply.
But now that we are at our worst – go ahead and test us out. Does your power company charge more per unit for the whole year than PowerKiwi and other Powershop retailers charge right now?
To check, simply take out your electricity bill from a traditional supplier, and look at two numbers only – the number of units of electricity that you consumed, and the total amount you paid – including GST and all those daily charges. Now divide the dollars by the units to find out how many cents per unit you are paying. Do this for a number of bills if you like.
Now comparing is hard – the price you pay depends on where you live, the amount of electricity you use, the number of meters you have and so on. But if you are using the average of 8000 units per year, and have one meter then your FlowerPower prices, including GST and all other charges, right now would be:
Auckland (1 meter, 8000 units/year)
Wellington (1 meter, 8000 units/year)
Christchurch (1 meter, 8000 units/year)
And of course other cities have other prices – but these are representative. These prices do change – it’s a marketplace after all. Abve all the prices you get from your current electricity retailer and from Powershop are personalised – there are plenty of factors that go into those prices. But do compare the above to your own supplier’s prices, and then switch.
There has been an interesting response to this seasonal increase in electricity prices at Powershop. How much of the lower overall electricity cost of the Powershop offering is a reflection of the transfer of the wholesale market price risk and (to a lesser extent) volume risk from the retailer to the consumer?
I’d be making it up.
I can say that the overheads of Powershop and Powerkiwi seem to be tiny versus the incumbents.
And yes – the traditional suppliers need to make sure that their fixed price to customers exceeds what their wholesale price could be in the worst of the worst, and this risk based price appears to be a lot higher than the market prices found on Powershop. But if an extreme crisis occurred Themis imagine the powershop prices could get higher than the yearly price from the other suppliers. That would be short term though, as summer and rain bring the prices down again.
Based on the previous dry winters, I’d say that whenever the retailers feel this pain (gosh, no profit this month, fire the actuary) they crank up the prices within 6 months as a seemingly unrelated event.
I signed on to powershop expecting seasonal price variations, to the extent of exceeding other retailers rates, was going to occur sometimes; I want retail access to current (if not spot) pricing and I’ll do my own actuarial work so long as I can buy hedges. I’ll do it badly, but it’s all mine and with no hidden risk premium.
So, how about Powershop becoming thinner and allowing more market access Lance? All kinds of opportunities present, including community bulk buying/hedging. Mmmm, playing the electricity market like the sharemarket.
There is interesting stuff we can do once we get to critical mass of customers. I’m not sure what that number is, but check back with me in year.
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