Forum Archive Index - June 2001

["Jeremy" <jeremy@electrosilk.net>]

From: "Jeff Smith" <jc.smith@waikato.ac.nz>
> My understanding is that Contact uses spot prices for wholesale
electricity,
> similar to the way gold mining companies spot the price of gold before it
is
> mined. Therefore as I see it, current and future climatic and hydrological
> status might be good or bad, depending on how smart Contact has been in
> spotting their wholesale prices.

The technical definition of spot pricing is the price for an actual transfer
in two days time (As compared to Tom(orrow) and Tod(ay))

Unless they are using spot pricing to set a price for a season or year then
I don't see how being astute in spot price deals can help them.  They are
simply subject to the day to day vagaries of the market.

Other schemes would help them better even out the cash flow, such as hedging
and forward contracts.

Jeremy



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