Low lake levels in the South Island saw wholesale (spot) electricity prices rise sharply towards the end of May. What does that mean for consumers?
Spot prices rise as lake levels fall
If you’re among the majority of customers on traditional fixed rate electricity tariffs, you’re unlikely to notice any changes in the short-term.
Greg Sise, managing director of electricity consultancy Energy Link, says while South Island hydro storage is significantly below average, which tends to increase spot prices, there’s still a long way to go before we hit the kind of conditions that saw a national electricity conservation campaign in 2003.
Grid operator Transpower estimates there’s less than a 2% risk of experiencing critically low lake levels causing electricity shortages in the next 2 months, barring “major unexpected equipment failures”.
However, if you’re on a spot tariff offered by retailers such as Flick Electric and Paua to the People, then you’re likely to have already encountered a week or two of higher bills. Spot tariffs remove the buffer between your bill and the wholesale price of power, which varies every half hour based on supply and demand.
Mr Sise says low lake levels heading into winter mean consumers on spot tariffs should be keeping an eye out for price spikes and limiting their exposure by getting into the habit of shifting some of their use to off-peak times. This might entail switching on the dishwasher when you go to bed rather than straight after dinner, or running the dryer during the day or overnight when prices are lowest.
Customers who don’t want to weather the risk of future price spikes should consider switching to a traditional fixed rate or smooth-pay plan, he says.
Flick Electric chief executive Steve O’Connor says this is the first time its customers have encountered a dry period leading into winter after what he describes as a “golden run” of low spot prices over the past 8 to 9 months. The company is encouraging customers to download its mobile app, which sends warning notifications when prices spike.
We say:
Spot tariffs can offer long-term savings, but you need to have the ability to weather periods of higher than average prices.
If you’re on a spot tariff this winter, keep a keen eye on your provider’s prices.
If you’re considering switching, visit powerswitch.org.nz to check your options.
Use electricityinfo.co.nz to view current spot prices around the country. It also shows price forecasts which are a useful indicator of upcoming spikes.