Electricity switching at four-year low amid high wholesale prices
By Gavin Evans
March 18 (BusinessDesk) - Switching in the retail electricity market is at a four-year low amid sustained high wholesale
prices.
About 30,340 customers changed supplier last month, 13 percent less than a year earlier and the lowest February total
since 2015. Switching in January was just 29,350, also a four-year low.
Switching is usually lowest in January and peaks in the winter months. It tends to jump sharply in February and March as
retailers use autumn to start recruiting campaigns.
Contact Energy, which is offering a free month of power on a 12-month fixed deal, was the best-performing brand last
month. It added more than 1,200 customers in February – its biggest gain in more than seven years. Nova Energy, which is
promoting its new broadband service heavily, was also among the few established generator-retailers to post gains.
But gains by newer independent players have been relatively flat since December amid prolonged high wholesale prices.
Electric Kiwi chief executive Luke Blincoe said now is not the time for independent firms to be trying to add to their
hedge positions.
His firm, which is almost fully hedged a year out, was the second-biggest gainer last month and now supplies almost
36,000 customers. It added more than 1,100 customers in February, its ninth straight month of 1,000-plus customer gains.
“We hedge to our forecasts and we had pretty ambitious targets,” Blincoe told BusinessDesk. “We’ve got a pretty good
view 18 months out in terms of what we can do.”
Wholesale power prices jumped in October and have remained elevated the past three months amid declining North Island
hydro storage, constrained gas supplies due to maintenance work at the Pohokura field, and strong irrigation demand on
the South Island.
Prices jumped last week as the onset of cold, still weather reduced wind production at the same time as maintenance work
at a handful of plants reduced geothermal and hydro production.
Power cost $234.53 a megawatt-hour on Friday, a one-month high and four-times that of a year earlier, according to the
Electricity Authority’s national price index. June-quarter Otahuhu futures jumped to $245/MWh last week, while the
September-quarter contract climbed to $220/MWh.
Investors and industry are concerned the completion of work at Pohokura next month may not leave sufficient time to
restore gas supplies for normal winter generation. Contact has cut production from its gas-fired plants in Taranaki and
last week indicated it drew down its stored gas reserves at Ahuroa to about 5.2 petajoules at the end of February. This
time last year it was storing gas.
Blincoe said the firm’s forecasting and hedging has been an asset. But the environment remains tough and the firm has
focused on “sticking to its knitting” and keeping its offer as consistent as possible.
“I’m not saying it’s easy.”
While all retailers are affected by the tight power supplies, those most reliant on spot-based products have had it
tough.
Flick Electric, which supplied almost 25,000 customers in September, lost another 260 accounts last month. The firm,
70-percent owned by Z Energy, has seen its customer book shrink to a two-year low of about 20,700 in five months.
Ecotricity, which includes a spot-based product among its carbon-zero certified supplies, added about 140 accounts last
month. That is down from gains of more than 250 a month prior to November.
Nelson-based NextGen Energy, which warned customers in January it would need to raise prices this month because of the
“unprecedented” jump in wholesale prices, still managed to add 21 accounts last month.
Rain can fill hydro lakes quickly, but national storage was about 21 percent below average last week, according to NZX
Energy data.
Storage in Lake Taupo, which supplies Mercury NZ’s plants on the Waikato River, is at its lowest since May 2015. North
Island inflows have been below average since late September. Inflows in the four weeks through March 14 were the
fourth-lowest since 1931, Energy Link noted last week.
Lake Pukaki, operated by Meridian Energy, is the country’s biggest hydro lake. Storage there was close to the five-year
average last week, Energy Link said.
(BusinessDesk)