Flick Electric unfazed by prospect of higher wholesale power prices

Monday 31st August 2015

Flick Electric, the electricity retailer which passes on wholesale prices directly to consumers, is unfazed by the prospects of scaled down generation in New Zealand driving prices higher.

New Zealand’s major electricity generator-retailers have been scaling back their investment intentions and closing older gas and coal-fired power stations as demand stalled in recent years. Contact Energy, Mighty River Power and Genesis Energy have announced plans to cut more than 1,000 Megawatts of generation capacity by closing gas and coal-fired plants.

MRP today highlighted the fact that reduced generation capacity is likely push up wholesale electricity prices, and ASX electricity futures pricing settlement in 2017 at about $6 per MWh hour higher than at present, or around $80/MWh.

Flick Electric has seen a change in wholesale prices recently, but is confident its model will continue to attract customers, with wholesale prices historically cheaper than retail over the long run.

Chief executive Steve O’Connor told BusinessDesk the Wellington-based company would not be reviewing its operating model because of the historical gap.

“Spot prices over the long run are cheaper than forward contracts,” he said. “We see a premium (in the) long run for customers.”

Flick Electric, which has been operating for about a year, raised $4.8 million in May from investors including Datacom shareholder Evander Management and venture capitalists Jenny Morel and Phil McCaw.

O’Connor said the company’s outlook was positive, with 4,000 customers acquired in line with expectations. The company had about 1,500 customers when it raised capital in May, and Electricity Authority data show it had 3,155 customers as at July 31, or just 0.2 percent of the market.

The company keeps its costs low by requiring weekly payments in full from customers in exchange for being able to take advantage of the lowest possible wholesale market energy prices.

“We are pretty much on plan at the moment,” he said.

Electricity Authority figures show Genesis Energy is still the biggest retailer with almost 26 percent of the market as at July 31, followed by Contact Energy at 21 percent, MRP at 19 percent, Meridian Energy at about 14 percent, and TrustPower has about 12 percent market share.

BusinessDesk.co.nz

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