Most consumers buy electricity on contract from retailers, who, in turn, purchase electricity on the wholesale market (via the Clearing Manager).
Wholesale electricity is bought and sold in the wholesale market at spot prices. These are set at certain points across the transmission grid every half hour. Contracts can be used to manage risks associated with spot prices.
Spot prices depend on the prices and quantities of generation offered into the market, the level of demand, transmission availability and system operation requirements. They can be very volatile on time scales from hours to seasons. Some commercial customers have contracts with their retailer that expose them to spot prices.
Spot prices can be an indicator of security of supply risk. Typically they rise during 'dry years'. For instance, during the 2008 dry winter, spot prices were over $200/MWh (20c/kWh) for a sustained period.
Recent Wholesale Spot Prices
Weekly average spot prices for each island are shown in the graphs below. The corresponding prices for 2017 are also included for comparison.
More up-to-date information can be obtained from services as listed in the related links.
The graph above shows a comparison of prices between 2017 and 2018 at the HAY2201 refeference node. The graph below is the same comparison at the BEN2201 reference node.
Information about Contracts
Because spot prices can be volatile, most wholesale buyers and sellers manage their risks by entering contracts that fix the price at an agreed level for the term of the contract (short, medium or long term). Over time, all retail prices and contracts tend to reflect spot price trends to some degree, but spot prices in a single half hour need not bear a close relationship to longer term wholesale prices. The retail price a customer pays also includes other components such as transmission and distribution charges.
Contracts can be traded as needs change, and trading prices can be informative about participants' views of forward spot prices. The New Zealand Electricity Futures and Options operated by ASX is a web-based contract trading platform that several wholesalers participate in.
Energylink's 'Energy Trendz' report includes an index that indicates trends in the price of fixed-price electricity contracts.
Market rules require that important contract information, especially price and quantity, is published for transparency on the Electricity Authority's hedge disclosure website.