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Business Energy Update

Business Energy Update May 2023

Business Energy Update – This month has seen many conflicting stories relating to the current energy market and if we’ve learnt anything from recent weeks… in simple terms, our advice would be to not make commercial procurement decisions on energy based on information you’ve heard or read around the domestic energy market. There needs to be a clear, distinct separation between the two very different entities, we cover this in great detail in one of our recent articles here.

In our business energy update, the standout misconception we’ve come across recently is that businesses can now afford to relax safe in the knowledge that the energy crisis is all over due to 17% decrease in Ofgem’s domestic price cap, which of course is great news (for the domestic market) but creates a lot of confusion in the business energy market…

The advice to our clients this week has been consistent and clear – If you hear something is going to happen to domestic energy prices, you can be sure that this has already happened to business energy prices, usually between 4-6 months previously.

Suppliers do not want the added headache and bad press from constantly changing prices to their domestic portfolios, so they take a longer view on the market before acting. Prices available to businesses/commercial on the other hand will change on a daily basis, moving in line with the wholesale market. So, businesses are already benefitting from the predicted drop in prices at home.

The domestic energy price cap is slow to react to actual wholesale pricing for a number of standout reasons. For example it’s being reduced in July yet wholesale prices have factually been falling for months since August until seasonal prices recently seemed to stop falling (day ahead still benefitting from all the things currently going in the markets favour (weather, gas storage, LNG).

The commercial energy market has hit a resistance point in the last 6-8 weeks, so we will likely have seen the bottom of the market for this summer. As a result, despite the conflicting and confusing news, it is highly unlikely that July will see a fall in prices for businesses across the UK.

We are currently seeing rates that are as low as they’ve been for around 18 months – Do not take the gamble on them continuing to fall, as always there will be more bumps in the road to come, for example gas prices have been predicted to nearly treble this winter across Europe with Goldman Sachs forecasting that prices could rise beyond €100 per megawatt hour in the second half of 2023 – a threefold increase from the present rate of €36.

It comes as prices have fallen in both Asia and Europe, the Telegraph reported, after demand has been lower following a mild winter, strong inflows of natural gas, and stockpiling.

Our advice to all commercial energy users is simple – If you’re within 12 months of your contract end date, speak to one of our experienced business energy consultants today and let them become your eyes and ears in the energy world and secure you the best possible rates ensuring your risk to rising costs are limited.

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Nick Simpson

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