Buyers lock in contracts to mitigate energy price rises

30 April 2012

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30 April 2012 | Adam Leach

Almost half of energy buyers are looking to lock in one- to two-year contracts to mitigate the impact of further price rises.

A survey of major UK and European energy buyers conducted by EnergyQuote JHA showed the industry expects prices to continue to increase. In giving their views on how the market will move, more than 63 per cent predicted a gradual rise in prices over the next two years, while more than 24 per cent saw prices continuing at the same levels.

In response to the rises, over 47 per cent of purchasers are considering buying at least half of the energy they need for the next one or two years at current prices. The survey found that 47 per cent of buyers use fixed annual calendar contracts when buying their energy, while a third take a mixed approach, using annual, quarter and month-long contracts and also buy off the spot market.

Commenting on the findings of the survey, Gary Worby, managing director at EnergyQuote JHA, said: “[Rising] energy costs are set to be the future norm. This damaging trend will have vast potential to impact on corporate profitability. It is therefore paramount that UK and European energy consumers have a detailed understanding of best practice energy procurement and can access insightful market intelligence to make informed decisions.”

Despite the expectation of continuing price rises, risk management did not appear to be a top priority among buyers. Just 12 per cent of respondents said they had recently completed a review of their risk strategy. The majority of buyers said they take an informal approach to it at the moment and may consider reviewing it in the future.

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