Electricity Prices: Are they starting to fall?

01 Feb 2001Archived News Climate Change Matters

Over the last week or so we have seen a general softening of electricity prices across the NEM. But is this an indication that the market is truly falling, or is it the calm before the storm?

 

Pool prices for the last few weeks have been relatively soft when compared to the high prices experienced over summer. Over summer, the average pool price in NSW was $42/MWh (VWA), compared to $32/MWh in March. Similarly, prices in Victoria have fallen from $56/MWh over summer to a March average of $31/MWh, while SA prices have halved from $81/MWh to $37/MWh over the same period.

Queensland was the only state that did not fair well, with an average (VWA) pool price over summer of $48/MWh, increasing to $52/MWh over March. Hardening prices across Queensland fly in the face of traditional market theory that would have expected prices in Queensland to soften across March of this year as more capacity appeared on the horizon and the new link with NSW became operational.

In response to the softening pool prices, contract prices have also started to fall, however they have fallen less than the spot market. Whether the contract market will continue to fall in line with spot prices over the next few weeks remains to be seen. Any dip in the market which does occur is expected to be short term as it is anticipated that pool prices will shortly move back up to above $40 per MWh as the weather becomes colder.

Unfortunately, it appears the environment of high electricity prices has become entrenched. For customers to gain the most advantage in this new market, they will need to adopt flexible and innovative strategies to take full advantage of any opportunities that may appear.

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