WEAKENING UK ENERGY PRICES PUTS CONSUMERS BACK IN THE DRIVING SEAT
Like many other markets, energy prices in the UK tend to follow seasonal trends of increases and decreases. Historically, in winter, colder weather increases energy demand, which tends to lead to high prices. This seasonality is reflected with lower prices in the summer when demand for gas and electricity is usually at its lowest and the UK system can be oversupplied.
Traditionally, consumers would use the dip in prices during spring and summer as a catalyst to look at renewing and renegotiating contracts for the coming year/s, benefitting from the lower prices at the time. However, we’re seeing a different story entirely this winter, as energy prices are on a downward trend. This is in stark contrast to the volatility that we’ve seen over the last few winters created by very high demand during extended cold snaps and low storage levels.
Gas prices are falling, thanks in part to a positive outlook for future supply – both in the UK and around the world. This is compounded by the relatively mild winter that we’ve experienced so far, and further by record highs in the import of LNG (liquified natural gas).
As the US, Russia and other countries ramp up their export of LNG, competing for dominance in the market, it is anticipated that this bearish trend could continue, potentially leading to a further 30% drop in the price of gas. Gas and electricity markets in the UK are closely linked, so the fall in the price of gas has, in turn, filtered through to the electricity market and helped to pressure prices down. This is positive news for consumers, particularly high energy users, who could be looking at reductions in their rates as part of their next contract negotiation.
We are currently working with a wide range of high energy user clients, advising them on how to reduce their energy bills and negotiating energy contracts on their behalf to ensure they’re benefitting from this change in prices and are, in turn, achieving the most competitive price in the market.
In response to the recent drop in markets, we are negotiating contract renewals now for gas and electricity contracts coming to an end throughout 2020 as opposed to waiting until spring/summer. We have also been securing longer-term contracts in order to help clients capitalise on current low prices throughout 2021 and, in some cases, as far out as 2022.
Carter Jonas would advise any consumer with a gas or electricity contract up for renewal in 2020 to start looking at prices in the market now in order to take advantage of current lows.
For more information, please contact Helen Melling, Energy Specialist at Carter Jonas.