Electricity spot prices are "volatile" and the distribution costs across sparsely populated areas and ''difficult terrain'' in Otago and Southland pushes the retail price in many areas past the national average, Electricity Authority chief executive Carl Hansen says.
Electricity spot prices - the prices at which retailers can buy electricity from the spot market - were updated every half hour, Mr Hansen said.
At 9.30am yesterday, Otago and Southland companies could buy electricity for $66.60/MWh - the cheapest price available in New Zealand.
The spot price in Northland at the same time was $106.34/MWh.
Mr Hansen said although spot prices were the cheapest in Otago and Southland yesterday, Otago and Southland did not have the cheapest average spot prices over the most of the year.
''The spot prices are very volatile ... Electricity retailers either take the risk of the spot prices for the consumer or hedge the prices for the consumer, a bit like insurance against times of high prices, such as drought, a hydro shortage or a cold winter,'' Mr Hansen said.
Line charges - the cost of electricity transmission and distribution - were included in the retail price.
In sparsely populated areas of Otago and Southland line charges were more expensive than the national average line charge of 10.77c/kWh.
''The main reason for large regional differences is the cost of distribution between sparsely and densely populated areas.
"For example, the Power Company Ltd, which serves most of Southland from Waikawa to Te Anau, has an average line charge of 11.57c/kWh. Similarly, OtagoNet has an average line charge of 19.20c/kWh,'' Mr Hansen said.
The Power Company Ltd and OtagoNet line charges were higher than the national average because they serviced more secluded areas of Otago and Southland, he said.
''This reflects the high cost of providing long lines to serve few consumers, and it also reflects the high cost of lines covering difficult terrain.''
But areas in Otago and Southland with denser populations, such as Dunedin and Invercargill, had lower line charges than the national average and lower retail prices than other regions.
Dunedin had a average line charge of 7.16c/kWh - which was cheaper than most areas of New Zealand, he said.
People should shop around for the cheapest electricity retailers, he said.
''Consumers have between five and nine brands to choose from in Otago, depending on their network.
"The more that consumers shop around for the best power deal, not only will they be getting cheaper electricity in the immediate term, but they will also be putting more pressure on retailers to compete.''
