goonix

Shopping for electricity – Powershop

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Recently Meridian established a new retailer in the electricity market, called Powershop. The marketing tells me that:

Powershop is a revolution in the way you buy power. We’re the world’s first online energy store, a retail outlet where electricity suppliers compete for your custom. This brings you a whole new level of choice and control over the way you shop, helping you save money and power.

Effectively you buy electricity in kWh units. You choose how many units you buy and for what period. The price of the electricity varies, depending on how you buy it. For example, if you buy a ‘bulk’ pack, you can typically get a cheaper per unit price than if you buy units in smaller bundles.

At the moment, with Southern Lakes brimming, prices are far cheaper than competing retailers. For example, the cheapest retailer that I could access in Wellington was charging 21.6 c/kWh (taking into account their discount), as well as a daily rate of around 80 c/day. Compare this to Powershop, where I have been buying electricity at around 18-19c/kWh, without any daily charge, and you can see the potential for savings.

The obvious risk from buying through Powershop is hydrological. Meridian (currently the only ‘major’ retailer on Powershop) generates the vast majority of their electricity through South Island hydro generation. If there was a dry winter, I imagine that prices over this period would be higher than that charged by a fixed-price, variable volume contract typically offered by other retailers. Thankfully Southern Lakes are brimming, so that shouldn’t be a problem…

…so long as the power can get from the South to North Island. Just this week the HVDC link that connects the islands tripped, meaning that the islands became electrically separated. As such, Meridian wouldn’t have been able to get their generation north. The threat of such an event occurring again means that Meridian will have to price this into Powershop rates.

At the very worst, if winter prices raised significantly due to hydrological/transmission problems, one can always switch back to another retailer, as Powershop has no contract term (switching costs are pretty low in my experience. I think I’ve changed retailer three times in as many years).

One nifty, if somewhat surprising, trick that I’ve been able to perform on Powershop relates to refunds. The other day I purchased a large block of electricity for just under 20 c/kWh. Later in the day I saw that the price of this unit had fallen to just over 18 c/kWh. I was able to refund the initial purchase and buy the cheaper power.

My experience with Powershop has been entirely positive and I’d recommend it if you can be bothered devoting a little time to your electricity purchasing (hell, even if you can’t be bothered with the transaction cost, you can set a default electricity product to purchase when you run out).

Matt Nolan

US GDP and imports

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Over at the Big Picture blog there has been talk about how bad GDP would have been if we take away the positive contribution of imports.

Fundamentally, imports fell and this “increased GDP”.  As a result, some people there have been looking at GDP excluding imports.

Now, this doesn’t actually make sense as a measure to look at.  Why?  Well when we measure GDP we are interested in “domestic production”.  When we measure consumption, investment, and government spending we get some domestically made stuff and some foreign made stuff.  We take out imports to remove the foreign made stuff that appears in consumption, investment, and government spending – leaving us with only domestic production.

If we don’t include imports we are effectively “double counting” (in this case double subtracting) and so a figure without imports doesn’t tell us much about domestic production – it effectively gives us some measure of world production associated with activity in the US.

Now, if we are interested in a hypothetical where imports had been unchanged and consumption and the such remained the same then inventories would have risen – as the goods and services don’t just disappear after they turn up at the port.  As a result we would have got the same GDP figure that we received the other day (a 6.1% annualised contraction).

Will Taylor

Investment bankers piss take

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These are real investment bankers (who I may or may not know…). Laughed my ass off when this arrived in my inbox this morning.

financialcrisis

Matt Nolan

Women, relationships, and game theory

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When reading about that hunk Hugh Jackman and his new movie Wolverine I read this story in Stuff.  In that story he mentioned the following comment from his wife:

He said: “She gets very annoyed. She says, ‘A husband’s job is to be fat and flabby and make me look fabulous.’ She said I wasn’t living up to my end of the bargain.”

My first reaction was awesome – she is being a bit sarcastic and she is willing to let her guy relax and enjoy himself.  Then my inner economist came along and actually explained to me the game that Hugh Jackman’s wife might be playing here.

Read more

jamesz

Alcohol and addiction: part II

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We posted recently criticising the method in which the Law Commission has decided to approach its revamp of alcohol regulation. In the comments there was some vociferous criticism of the BERL report on which the Law Commissions relied for its estimates of the harm of alcohol usage. We were also lucky enough to have a personal reply from the author of the report, explaining why BERL did things the way that they did. I thought this would be a good time to clear up any confusion about where I stand on the issue. Read more

Matt Nolan

April 09: RBNZ cuts OCR to 2.5%

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The RBNZ cut the official cash rate by 50 basis points to 2.5%. This wasn’t to surprising. However, the statement was a hell of a lot more dovish than I expected, especially:

We expect to keep the OCR at or below the current level through until the latter part of 2010.

So the RBNZ is stating that it will leave the OCR at or below 2.5% until LATE-2010. That is a commitment to expansionary policy for quite sometime. In that case, the RBNZ’s outlook for economic activity must have deteriorated substantially for late 2009 and 2010.