Why does your price change even when on a fixed priced term?
This is the question which all of us ask when we receive a price change letter or email in March every year. Now you all must be wondering that how come I am getting a price change even when I signed a fixed term contract recently.
Yes, your price can still change, even on a fixed price contract. Confused?
To understand the reason behind it, we need to understand the composition of your Energy prices.
Your Electricity prices are a combination of Network Charges (like Vector, PowerCo, United etc), Energy Charges (like Meridian, Mercury, Genesis etc) and Government Charges (GST, Levies).
Each year a price review is done by the Network effective 01 April. This is the time they evaluate their charges to get the power to your house or business.
Around the same time, your Energy Charges is also reviewed by the Electricity companies depending on how the Energy market have acted in the past year. Now, when you are on a fixed term prices, you are fixing the Energy Component of your price.
This is the price that is being charged by your retailer (like Meridian, Nova) for selling you the electricity depending on their costing from the wholesale market. Your network charges can still change based on the changes from your Network company.
So how does fixed price helps you?
When you are on a fixed term price, it acts like a cushion to your prices. The network charges can change (increase or decrease), whereas the Energy component, which is actually the maximum component of your rates, cannot change.
This means that if you are on a fixed term price, your price change will be nominal as compared to the non-contracted prices.
For example, the average price increases this year for fixed price customers with Manage My Bills is around 1%.
Whereas the Electricity wholesale price have increased a lot since last year due to various factors like low hydro levels, less rain, shortage of Gas (which can be used to generate electricity). Which means that if you were not on a fixed term price, the price increase would have been in the range of 8-10%.
This is the reason we advise to be on a fixed term prices so that you have a cushion of your prices not increasing 8-10% every year.
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