To spot or not to spot, that is the question.
There are two types of energy contracts on the market, spot pricing or fixed pricing. Many businesses are on a spot price contract which means there is no certainty in what you will pay for your energy. At the end of the month, the bill could arrive at a reasonable cost or an astronomical one!
And in the current market, the latter is more likely.
So, should you be on spot pricing or a fixed term contract?
Let’s answer that question by looking at what spot pricing actually is, what the spot price market has been doing lately and what a fixed price contract could do for your business.
What Is Spot Pricing?
A spot price is the price you pay when you buy electricity from the wholesale market.
It is based on the price you pay “on the spot”. So, the exact price the market deems your electricity costs at the time you use it. Spot prices can change every 30mins and the rate can vary dramatically.
What causes it to vary?
Like anything, it is supply and demand. You will find that your spot rates are higher at the most popular times for energy consumption. That includes winter, breakfast and dinner time, and when the All Blacks play Australia on a Saturday evening! If a lot of people want to use electricity at the same time, then it pushes the spot price up.
Buying at the spot price can be beneficial if the rates are low. But it can be equally detrimental if the rates are high. This is especially dangerous if you use a lot of your energy at peak times in the day. It can cost your business more than needed as it all depends on the current market.
The Current Spot Market
It is safe to say that the electricity Spot Market has been pretty volatile lately. In fact, the spot market has been a lot higher over the last few years and is forecasted to increase further.
For example, in the Upper South Island, the spot market averaged 9.8c/kWh throughout 2017 and 2018. But in Feb 2019, the spot price has jumped up to 13c/kWh with a forecasted rise to 13.9c/kWh for the rest of the year.
Why is it rising so rapidly?
There are a number of reasons for this increase. The main reason is that demand has grown. As society’s love of technology grows, so do our energy needs. Coupled with the rising cost of coal, unplanned outages from old plants, reduced hydropower from dry spells, and a dip in the gas market due to the offshore drilling ban and outages at Pohokura.
So, is now the time to consider a Fixed Price Contract?
Why A Fixed Price Contract?
With all the volatility in the spot market, there are definite benefits to having a fixed price contract in place. Cost saving is the obvious reason. So are certainty and being able to budget your energy costs.
We mentioned above that the spot price is going to be around 13.9c/kWh this year. Currently, we are negotiating fixed price contracts at a rate of 9ckWh for our key customers through our specialised tender process. That can achieve savings within the thousands (or tens of thousands dependent on your energy needs) for your business. That is money far better in your pocket than in that of your energy provider!
So, how can we do it?
Our tender process does not present your business as a standalone entity. Instead, we leverage our popularity in the energy broker market to secure your business the best possible rates via the best possible contract for your needs.
If you are ready to save big dollars on your energy bill, then you can take advantage of this tender process. Simply fill in some details, provide us with a copy of your current energy bill and we will do the rest. We will advocate on your behalf, for your specific situation in exchange for a share of the savings. The great news is that if we don’t manage to find you any savings, it costs your business nothing.
So what have you got to lose?
Get in touch with us today to find out how you could be paying much less for your energy costs.