Discounts fuel long-term deal offers

28 March 2002
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28 March 2002 | David Arminas

Electricity purchasers are being asked to sign long-term contracts after some saw prices fall dramatically in April's round of negotiations.

Buyers in England and Wales saw prices fall by up to 20 per cent. But buyers in Northern Ireland did best, with reductions of up to 30 per cent on last year, as the undersea Scottish Interconnector came on stream at the beginning of the year.

Some suppliers are pushing for buyers to consider an early October round contract based on April prices, said Martin Rawlings, deputy chairman of the CIPS energy committee and managing director of consultancy Worldwide Energy Bureau.

"That might be an indication that prices could fall further and suppliers are hoping to lock in buyers to today's higher prices," he said. "My advice to buyers is don't necessarily accept these early offers to retain April round prices past October, but negotiate hard."

But Hugh Conway, electricity group chairman of the Major Energy Users' Council, believed that prices were nearing their lowest possible point.

There is a 30 per cent surplus of electricity, so some generators might mothball plants, which could mean the surplus disappears and prices rise, he said.

"If you are offered longer-term contracts at April prices, I would grab them," he said.

SMmar2002

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