The electricity industry has its complexities, but here at Flick Electric Co. we try our best to unravel the knot that is power pricing. We’re on a mission to be completely transparent, giving Flicksters access to the spot market price of power and empowering them to monitor and change the way they use electricity to make killer savings.
But this is more challenging than it might seem. The cost of electricity is influenced by a number of factors – something we saw first hand during the Port Hills fires in Christchurch earlier this year, when supply was fragile and the market volatile due to the ongoing threat of fire.
So we’ve compiled a bit of info to help explain how pricing is determined, how price spikes might occur and why you might sometimes see a price estimate rather than a final price on your weekly bill.
The spot prices you benefit from with Flick are forecasted regularly. We receive forecast prices for the next four-hour period every 30 minutes and load them into your Flick customer app (the one you access through our website) – you can see them on the ‘Snapshot’ and ‘Today’ tabs of your dashboard. Although these are a good indication of final pricing, from time to time they may not reflect the actual price you pay.
There are four stages spot prices go through from forecast to final, each progressively more accurate than the last as the market gets closer to reaching a final price based on supply and demand:
The forecast price does not become the final price, but in 99.5% of cases, when the market and system work under normal conditions, it’s a close reflection of the final price.
In reality though, things sometimes happen that mean there’s a difference between what’s forecast and what actually happens in the market. Cold weather, storms, generation shortfalls (some power stations not producing as much electricity as normal), transmission constraints (limited ability to move power around the country) and local network outages can all affect supply and demand, which in turn affects pricing.
Sometimes there’s a delay in final prices being available in time for billing. If that happens we’ll provide you an estimate based on the most accurate prices available, then reconcile any difference between that and the final price once released, normally in time for your next bill.
Well, this just means that the system operator (Transpower) doesn’t have all of the data it needs to calculate accurate prices for certain half-hourly periods. In the interim they use an extreme ‘placeholder’ (or stand-in) price of 50,000 cents per kWh in the data they send us, to signal ‘infeasible pricing’. If you’re a Flick customer, we’ll let you know in your CHOICE app that we’re getting some unreliable pricing information, and you should hold tight. Your daily total will be adjusted when we receive the final prices from Transpower in around two days time, and they’re normally similar to the 2 half hour periods either side of the infeasible pricing event.
To complicate things further, 5-minute indicative prices, often called “real-time prices”, are calculated at the end of each 5 minute period for every location too. They take into account the conditions of the power system at the beginning of the relevant 5 minute period. There is lot of variability in these prices, and Flick does not currently use them in its alerts or pricing tools, however they are available via other sources (Electricity Market Overview, Wholesale Information Trading System and Nodewatch). This is why you might receive an alert from these services despite not receiving one from your CHOICE app, or why you might see a different price displayed compared with your Flick tools.
Want to know more? Read up on the impact of price spikes in our ‘Keep calm: it’s just a price spike’ blog.