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Electricity Rates in Review – September 2016

NSW (Increase)

Wholesale futures prices in NSW trended up significantly in the month of September with an average increase of over 10%. This was in part driven by speculation relating to the potential closure of Hazelwood power station early next year. Rates have since trended lower in October.

Queensland (Increase)

Wholesale futures prices in QLD increased by over 5% in September which would have seemed significant in ordinary market conditions. However this increased paled in comparison to the southeastern states. Rates have since trended lower in October.

South Australian (Decrease): Surprisingly, South Australia saw some of the most significant price falls all year ending September down by an average of 0.5%. The South Australian spot market was suspended following the power outage and forward market trading volumes remain low with futures prices stable. Rates have since trended lower in October.

Victoria (Increase): Victoria experience the most volatility of the NEM in September 16. Wholesale futures increased by an average of 23%. Rates have since trended lower.

Futures market volatility is driven by the level of uncertainty about future electricity spot prices. Uncertainty is prevalent in the current market and that’s why futures rates have risen so dramatically. Rates have since trended lower in October.

Final thought:  Futures markets hate uncertainty. But there appears to be only one certainty in this current crazy market and that is that uncertainty is here to stay for some time yet.

About Leading Edge

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