To understand the true underlying wholesale price you need to look at the long haul margin cost, not the average spot price in winter, that price of peak in winter reflects the lower overall demand on the National Grid and is due to the lower cost power stations being despatched to set the spot price.
If you are going to try to establish the average price the Retailers are facing as input cost you need to look at the weighted average for 12 months, and probably across more than one 12 months, ie the long haul marginal cost.
You are comparing the fixed price of the retail prices to effectively the lowest daytime prices (peak) that occur in the market, ie Winter;
Even then there are spikes in the market, on the 21 of June in Victoria the spot market hit $1755/MWh or effectively $1.80/ kWh
The spot market is set by the price bid in by the highest generator to be dispatched, in this way wind and hydro might bid in $0 but ultimately be paid $32 for the 30 minute period, the fair way to understand the input cost to a retailer is to understand the average cost across the year, as they fix your tariff for the year, they are not providing seasonal pricing or exposure to VOLL - yet.
VOLL is a Wholesale market cap on the highest price retailers can pay, it is currently set at $10,000/MWh or $10/kWh and the last VOLL event was in late January 2009.
You can see from the AEMO average daily data below that the Summer price is much more volitile and can move from 5c to 30c quite easily due to warmer weather and largely the airconditioning load increases.
Interestingly this data shows the price in Tas being negative on a few days, proving even AEMO can get it wrong - smiles
................RRP Peak....RRP RRP Peak.. RRP RRP Peak..RRP RRP Peak RRP.. RRP Peak RRP
01/07/2010..29.66 30.39....23.59 26.13....32.34 27.49........13.17 2.03..........20.04 13.77
28/01/2009...62.36 84.82...55.99 75.33....1276.72 2017.19...78.97 103.71...... 404.53 625.17
29/01/2009 132.32 195.... 96.81 138.75 ...1777.67 2792.99...513.53 774.84.....2376.06 3755.5
02/02/2009..52.25 70.06....37.49 47.61....60.16 80.5......... 78.41 93.56........56.32 74.84
09/02/2009..32.48 36.9 ....121.39 180.01. 6.80 33.12......... 54.04 65.79....... 10.57 32.81
02/02/2010..27.18 29.53... 27.05 30.35... 140.55 211.46....44.04 -85.56......146.37 220.87
03/02/2010..32.06 36.64...31.06 36.35....192.64 292.86.. -76.01 -138.29.... 200.73 306.49
04/02/2010 300.80 467.05..26.13 30.25....27.76 29.29..... .31.43 33.27......... 27.74 30.04
to be charging something at peak for >20c/kWh that is COSTING 10.179+3.20=13.379c/kWh at most (and 90% of the time is even less than that) is good margins no matter how you slice and dice it.
I therefore think your use of 3c as the average peak rate input costs to Retailers is too simplistic and incorrect as its too low, my 8c would be generous but still leaves a very large gross margin for the Retailers.
i don't buy the argument of "substancial costs and backend IT systems", its very clear to me that its clearly not a strong point in their business
There are very substantial costs to the energy trading, pricing, and billing systems of retailers (usually desparate systems) .
As an example AGL recently implemented SAP as its new billing engine, the $90M project has blown out to $215M, the costs arise in the need to apply different bundled pricing per Network area, and there are 13 seperate distributors in the NEM, each Retailer has the same issue.http://www.misaustralia.com/viewer.aspx?EDP://20090226000030875863§ion=management
AGL billing system's big bill
Thursday, 26 February 2009 | Chris Jenkins
AGL has spent more than $215 million on its SAP-based Phoenix billing project
The "Phoenix" project was meant to save $35M per annum from operating 5 legacy billing systems, however that has not been realised and was in fact over ambitious as this new SAP system requires more key entries for the same given action.
Both AGL and Origin have outsourced their IT Server operations to India to reduce costs, along with their call centres, AGL is currently outsourcing their billing to Malaysia to try a further reduce costs in light of the huge blow out in their SAP implementation costs.
"Phoenix" is an apt name, the bird has to crash and burn before it rises again.
(I dont work for AGL, that doesnt mean I dont know what is going on inside it, or other businesses)
AGL have continued to have horrendous EWOV complaints (the worst performer) followed closely by Tru Energy.
It is the use of Temps and outsourced oversea's resources that leads to most of the incompetence in Australian retailers, they retain no technical expertise on metering or connections yet are the primary contact point for customers on both. As previously mentioned, I am not even convinced Tru Energy know their own retail products well enough to accurately quote them.
Tru Energy is currently rebuilding its internal capabilities after a disasterous outsourcing program, and has been reprogramming billing routines furiously in the last 6 months to bill ToU PFiT.
There are high and real costs to these back office systems that can't just be shrugged off as minor.