Power retailer Payless Energy to stop selling electricity due to wholesale electricity market volatility

Tuesday, 6 November 2018

There are lots of components in a typical power bill.

Otago power retailer Payless Energy is pulling out of the market, blaming market volatility.

There have been rumours that three small players in the market had been nearing default as wholesale prices soared in recent weeks.

Wholesale, or spot, prices are what retailers pay generators for the power they sell.

Last month, the average wholesale price was $300 per MWh. That's just under three times the highest October monthly average previously recorded.

* Power generators 'made $5.4 billion in excess profits'**

If retailers do not have enough 'hedging' - or future supplies of power locked in and a guaranteed price, they have had to absorb that cost increase.

Small retailers are most likely to have limited hedging.

Payless said it would no longer sell power, blaming unusual market volatility which has seen wholesale spot prices rocket up and causing it 'funding pressures'.

Payless Energy has bowed out of the electricity market, blaming market volatility.

Electricity Authority data shows it had 645 customers. It was serving Dunedin, Otago, Queenstown, Waitaki and Invercargill.

In a Facebook post the Dunedin-based retailer said it was 'discontinuing its retail electricity business'.

'This has been a difficult decision after [seven] years serving the Otago community but for the sake of our customers and community it is a decision that has been unavoidable.'

It said the increase in wholesale prices seen in the last couple of months created funding pressures for Payless Energy 'which was not sustainable in the long term'.

In a report last year, it was noted that Payless's current growth in customers was already straining its systems.

Payless has entered an agreement with Pioneer Energy to take over its customer base.

Payless was run by managing director Chessa Mierzejewski. The retailer used to sponsor the Otago Volts cricket team,

It offered a variety of pricing plans, including an option for day/night tariffs. It did not offer variable pricing, so customers would not have experienced any of the recent increase in wholesale prices.

In 2016, Payless Energy received the Deloitte Fast50 regional award for the Fastest Growing Retail or Consumer Products Business for the Otago and Lower South Island. It was also named 18th on the Deloitte list of fastest growing companies in New Zealand.

Payless Energy has been approached for comment.