There are two main types of electricity prices in New Zealand
– wholesale and retail.
The wholesale or ‘spot’ price is established by the NZEM,
for each half hour, daily, at over 240 Grid Exit Points (GXPs)
around the country, by accepting offers from generators for
supply to the market.
The retail price is the price business and domestic consumers
pay for their electricity.
Wholesale price
Mighty River Power might, for example, offer 200 MW at $35/MW
for a set period of time. Other generators also make offers
and M-Co (who administer the market on behalf of the NZEM) build
a supply stack:
| Generator |
Supply Amount (MW) |
Price |
| A |
150 |
$30 |
| MRP |
200 |
$35 |
|
B
|
50
|
$40
|
|
C
|
100
|
$45
|
|
D
|
75
|
$50
|
Each generator makes five such offers (also called tranches),
each half-hour, until the price is set.
If New Zealand’s demand is 400MW (supply must of course equal
demand), NZEM adds up the cheapest providers until 400MW of
supply is met. In this case the first three suppliers add up
to 400MW. Market rules dictate that the last generator to be
chosen sets the market price – so the market price in the example
above is $40 for every megawatt. Regardless that Generator A
was prepared to dispatch at $30, the market-clearing price is
$40. Generators C and D will hold back their supply until another
time.
As a retailer, Mercury Energy can provide you with access
to these spot prices through our Market Linked product.
The spot price can fluctuate over a period of time due to:
- Lake levels and inflows.
- Fuel availability (gas/coal).
- The distance of the Grid Exit Point from generation,
e.g. the West Coast or Gisborne.
- Constraints across the high voltage grid, e.g. Benmore-Haywards
constraint.
- The level of electricity demand, e.g. cold days.
- Inaccurate demand forecasts.
- Government policy, e.g. Kyoto carbon tax.
For further information on the electricity spot market visit
the NZEM website:
www.nzelectricity.co.nz
Click here to check spot prices online.
Retail price
The retail price is the price business and domestic consumers
pay for their electricity. This is calculated for fixed time
periods, based on a number of factors, including expected demand
from that consumer or group of consumers, and forecasted movements
in the wholesale price market.
Electricity retailers share the risk of price and volume
by offering products such as hedges that include a commitment
to buy a fixed volume of electricity.
Mercury Energy pricing options
There are a number of options that Mercury Energy offer large
business customers when buying electricity. Please note that
while customer invoices also include other charges such as line
and metering charges, Mercury Energy passes on these charges
to customers at cost on behalf of those service providers.
For more details on the choice of pricing options Mercury
Energy offers Large Business customers,
click here.
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