Power use drops in lockdown

People don’t seem to be using more electricity under the COVID-19 lockdown and EV owners are likely to have their vehicles mostly parked anyway.

Mercury says the pandemic restrictions have led to a 15% decrease in electricity demand in the fortnight from March 26 (lockdown start) compared with the same period last year.

Dry conditions and early impacts of pandemic restrictions have it forecasting $10 million less in earnings for the year to June (EBITDAF guidance $490m compared with February’s $500m).

It doesn’t say why the demand dropped in its quarterly update to March 31, but the presumption is many businesses are closed or operating below capacity.

Mercury does say its robust business continuity planning enabled a smooth transition to operating under the COVID-19 lockdown.

All office-based staff are working from home, while its Turitea wind farm and geothermal drilling are on hold pending the easing of restrictions.

Mercury’s high Taupo storage position at the start of the period enabled increased hydro generation despite significantly below-average inflows.

Hydro generation of 839GWh was 77GWh higher than the prior comparable period, despite Waikato catchment inflows at the second percentile, with geothermal generation slightly lower at 658GWh in the quarter versus 660GWh in FY2019-Q3.

Due to low inflows over the quarter, Mercury’s mid-point FY2020 hydro forecast has been reduced by 100GWh to 3800GWh.

Spot prices decreased compared to FY2019-Q3 as high national storage at the start of the quarter was supplemented by 93rd percentile South Island inflows in February, maintaining national hydro storage well above average across the quarter and mitigating the effect of high-voltage direct current (HVDC) and thermal fuel supply outages. Prices decreased from record highs in FY2019-Q3, going from $162/MWh at Otahuhu and $145/MWh at Benmore to $82/MWh and $52/MWh respectively.

Mercury’s portfolio of North Island generation was able to benefit from price separation between the North and South Islands (basis) resulting in the LWAP/GWAP ratio decreasing favourably to 1.00 from 1.04 in the prior comparable period.

Futures prices decreased significantly in the quarter reflecting the impact of the COVID-19 lockdown with prices for FY2021 decreasing from $123/MWh to $96/MWh at Otahuhu and from $96/MWh to $79/MWh at Benmore.

FY2022 futures also decreased in the quarter by $2/MWh at Otahuhu (from $96/MWh to $94/MWh) and by $15/MWh (from $85/MWh to $70/MWh) at Benmore with a significant increase in basis spread likely driven by the pending Rio Tinto review of continued operations at the Tiwai aluminium smelter.

Mercury’s continued focus on customer value resulted in the commercial and industrial average sales yield (including both physical and financial sales) increasing by 12.7%, from $82/MWh in the same quarter in FY2019 to $92/MWh in the current quarter. Sales volumes in the channel also increased by 82GWh from 657GWh in FY2019-Q3 to 739GWh in FY2020-Q3.

Other CFD volumes and yields were up, reflecting increased trading activity.

The yield on mass market sales also increased by 2.8% from $125/MWh in FY2019-Q3 to $129/MWh in the most recent quarter.

Mercury’s portfolio management strategy, which included the exit of Farm Source contracts, resulted in sales volumes in the mass market channel decreasing by 77GWh from 679GWh in FY2019-Q3 to 602GWh in FY2020-Q3.