18 March 2004 | David Arminas
Purchasers should brace themselves for more hefty electricity price hikes in the October round of contract negotiations.
Prices rose around 30 per cent for next month's April round of contracts and this trend could continue, according to Martin Rawlings, deputy chairman of the CIPS energy committee.
"The October round should be no different," he told SM.
"Prices are around £23/MWhr on the spot market, rising from around a low of £15/MWhr when a lot of power stations began closing down their generation. It will take time to get this lost generation back on stream."
Shaun McCarthy, head of group utilities at BAA, which owns seven airports including Heathrow, Gatwick and Stansted, and is one of the UK's 20 biggest electricity users, has seen rises of 17-23 per cent in delivered energy prices.
"Price competition is less keen than before, so buyers should seek to differentiate suppliers on service elements such as billing," he said.
"Raw material prices look set to remain high and environmental legislation will push prices up."
He added that BAA has saved up to 3 per cent on a three-year flexible contract, extendible to five years when the company can buy blocks of electricity to take advantage of short-term price dips.
Rawlings, who is also the founder of consultancy World Wide Energy Bureau, said he doubted rumours of price manipulation by suppliers.
Many UK coal-fired generation stations will have to raise their energy prices to cover their penalty costs for excessive carbon dioxide emissions.