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What Is Spot Pricing? Understanding Wholesale Electricity Costs
Spot pricing means you’ll pay the real-time, fluctuating market costs of electricity. In addition there are some things to consider and a few steps we recommend taking to help assess whether spot pricing is right for you.
We calculate every half hour of load we supply in the following way:
(Energy Charges + Spot Fee) x Load
|
ENERGY CHARGES |
SPOT FEE |
LOAD |
|
This is the final price at the relevant Grid Exit Point (GXP), in line with the Electricity Industry Participation Code 2010, for the half-hour period, expressed in $/MWh divided by 10. |
This is set at 0.7 c/kWh |
This is the amount of electricity (in kilowatt-hours) supplied to each ICP number (in Schedule 1 above) at the relevant GXP during the half-hour period when the Energy Charges apply. |
Assessing your risk of exposure to fluctuating wholesale prices
As your electricity retailer, it’s our job to pass on any relevant information to our spot pricing customers about the risks of exposure to fluctuating spot prices. This includes reminding you to periodically assess your risk, how to do this, and how we can help.
It’s important you know the risks involved, as you are accountable for the consequences of your risk management decisions.
How to assess your risk
You can assess your risk using the Electricity Authority’s (EA) stress test regime.
The regime is designed to make spot market participants aware of exposure risks – e.g., having insufficient hedge cover to cope with periods of high prices. It doesn’t impose any mandatory obligations on you, as a spot market purchaser through Simply Energy, or constrain your choices in the electricity or hedge markets.
The regime has a set of simplified stress tests that enable you to assess your exposure to spot market prices, and can be found on the EA website.
