How could spot prices affect my bill?

Before you refer to the examples, you should decide which of the following applies to your situation:

• you’re a flexible household that manages to use much of its power at the time of the day when the spot price is lowest
• you’re a normal household that uses most of its power in the morning and early evening when the spot price tends to be relatively high.

These are examples of what spot prices can do in severe circumstances. Nonetheless, spot prices could be higher or last for longer than set out in these examples.

Example 1 – high prices for several months

Spot prices can increase to several times the normal level, for several months in a row. This might happen if South Island hydro lakes are low, because of low rainfall. The system operator publishes regular reports on hydro lake levels.

This table shows the effects of high spot prices on the spot-priced portion of an electricity bill. In each of the situations the spot-priced portion of the electricity bill increases by nearly three times, as shown in the fifth column. The sixth column (on the far right) shows the additional cost if the high prices continue for three months.

* per winter billing period including GST. Additional non-spot price charges and associated GST will apply. Non-spot charges and GST make up the sizable portion of a typical bill and include payment for electricity transmission, lines and metering.
^ including GST, over and above what your normal spot priced winter power bill would be. Is rounded to the nearest $5.

Example 2 - very high prices for eight hours

It is possible for spot prices to increase to hundreds of times the normal level for a period as short as half an hour. This might happen if a power station suddenly shuts down and there is limited back-up generation available.

This example assumes that the ‘flexible’ household does not receive warning of the high spot price in time to switch off appliances. In practice, there may be no advance warning of high prices.

This table shows the effects of eight hours of very high spot prices on the spot-priced portion of an electricity bill. In each of the weekly situations, the spot-priced portion of the electricity bill (shown in the last column) increases by about seven times. In each of the monthly situations, the spot-priced portion of the bill increases by nearly two and a half times.

* per winter billing period including GST. Additional non-spot charges and associated GST will apply. Non-spot charges and GST make up a sizable portion of a typical bill and include payment for electricity transmission, lines and metering.

For the technically minded…

The following table sets out our assumptions about spot prices and the increases we make to account for households using a greater proportion of their power at high-priced times.