MCY Mercury NZ ( MRP Mighty River Power)

[Snoopy]

Will electric vehicle really be able to lift Mercury Energy profits over the next few years? It is time to find out.

Most power consumers will pay a monthly energy bill that contains a fixed charge and a variable charge. This perpetuates an illusion that because people understand how they think themselves as regards their power bills, they also understand how energy companies think by imagining themselves on the flip side of their monthly transaction. Unfortunately consumers do not really understand how energy companies think though, because the billing system that the energy company manages is far more complicated than what the consumer sees. I am a Christchurch consumer and consequently my electricity lines are managed by Orion. I don't suppose all line's companies operate in exactly the same way. But the Orion example will serve the purpose of this explanation. Stay tuned if you want to find out more.

In the back page of a free local Newspaper about a year ago, Orion published details of their electricity price delivery charges. I was probably one of a handful of people who read the advertisement and probably the only one who cut it out. To keep it simple I will talk about 'General Connections' of which there were just over 198,000 in the Orion serviced area.

Orion Electricity Delivery Prices (from 01-04-2017)

Peak Charge (peak period demand)		$0.5310 /kW/day
Volume Charge	: Weekdays Mon-Fri 7am to 9pm	$0.08773 /kW
	: Nights and Weekends	$0.01125 /kW
Low Power factor Charge		$0.20 /kVa/day

Notice how different this structure is to the prices you pay in your own power bills at home. For a start there is no 'fixed daily charge'. The daily charge varies depending on your power use over the peak power period. Consider the scenario of someone cooking dinner for a family on a cold winter's night. Let's say the peak power use was 5kW over the hour (5kWh) while I (as an example) was cooking dinner. This means that my provider (Contact Energy) would be paying a daily charge delivery of:

$0.5310/kw x 5 kW = $2.65

Since I am only being charged 32.95c/day on the low user rate (29.66c with GST added and 20% discount taken off) this means Contact are losing out big time on fixed charges. Of course if I was away on holiday and peak power consumption is a background 150W, then my daily charge would for me billed to Contact would be.

$0.5310/kw x 0.15 kW = 8c

So even with my low user rate, Contact are well in the money.

My house has a dual electricity pricing structure. I pay 28.129c 'Anytime' ( 25.32c with GST added and 20% discount taken off) and 17.548c ( 15.79c with GST added and 20% discount taken off) 'Night Boost'. I should point out that these numbers will cover the transmission costs of Transpower and Orion as well as the energy cost of the power supplied by Contact Energy. So it is not an apples with apples comparison to compare these charges with what Contact pays to Orion. What is of interest is the ratio of Peak to off Peak charging.

In my case my 'Night Rate' is 17.548c/28.129c = 62% of the day rate charge.

In the case of Orion their 'Night Rate' is $0.01125/ $0.08773 = 13% of the day rate charge

Now I don't like peak charging. But Orion hates power peaks with an absolute passion. They really sting the energy providers hard, charging them nearly eight times more per kilowatt at peak times.

I won't go into the power factor charge here, as that is something the energy providers take on the chin and we the end line consumer gets away with.

The point of this post is this. Energy providers are getting quite different pricing signals from Orion, compared to what they pass on to we consumers. Orion (and Transpower) hate power peaks with a passion. If Fraser could convince we consumers to use a lot more off peak power this could benefit the end user in the pocket, but benefit the energy provider much more. I think the quest to get a lot more consumers charging their EVs at night could be a real winner for the Energy Retailers like Mercury. Time to put some big picture numbers on it!

SNOOPY