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Utilities & Environmental

Energy Update for 31 August 2017

By 31st August 2017April 4th, 2019No Comments

Last week we generally saw prices increasing again, a bit of a trend over the past month or so now. It was a bit of a mixed bag. We had some good sunshine and some good wind at times which helped make the price movements on electricity a little bit more volatile, but overall the key drivers to start the week were the ongoing outages in Norway which has been reducing gas imports into the U.K. Most of those seem to have resolved themselves now. However as the week came to an end fears about the impact of the hurricane in Texas, which has impacted oil production was filtering through into gas prices on a global scale as well.

If you add to this the impact of a very weak pound last week reaching, I think, an eight-year low which always encourages speculators in Euros to invest in the U.K. energy market, then all in all prices drifting upwards again. Looking forward as ever, it’s an uncertain picture. There seems to be more confidence that the nuclear review will not have the impact that was initially feared. However, there remain concerns that the Norwegian gas supply situation is volatile and as we enter a winter period that can’t be good news.

Finally, I’d like to bring to your attention the fact that the government is putting the national grid and distribution network operators under a lot of scrutiny at the moment with a view to try to find ways of reducing their costs. Now distribution and transmission charges make up over 20% of an energy bill at the moment so that’s quite good news so long as obviously what they do doesn’t impact the quality of supply that we receive. However, customers that are on pass through contracts, those contracts that take the published price from the transmission and distribution businesses, will benefit the most if those costs are reduced because they pay the prevailing rate.

Customers on all inclusive contracts will be committed to pay those costs over the lifetime that remains in the contract. So I think it might be worthwhile considering looking at pass through contracts going forward as there could be particular value if the government do go ahead with making those reductions.

If you’d like to know a little bit more about pass through contracts and other ways of perhaps reducing your costs through managing your energy to avoid some of those pass through elements, then please give us a call.