What to expect from current UK Power Prices…
Downs:
- Gas and Power commodity costs have fallen due to lower demand during lock-down.
- Near Term prices, i.e. those for the summer 2020 have weakened the most.
- Prices for winter 2020 and beyond have weakened, but did not weaken as much as summer 2020.
Ups:
- The majority of network, policy and system costs are spread across national consumption, so recouped as a p/kWh amount.
- When national consumption falls, the p/kWh increases. COVID-19 resulted in global lockdowns, energy demand reduction, leading to higher third party costs in terms of p/kWh.
- Third party costs are now spread across lower consumption, hence increased charge.
What does this mean for my contract and bills?
Pass Through Contracts:
Customers will see increases as third party cost forecasts increase due to lower national energy demand.
Fixed Contracts:
Prices will remain as per the contract, unless costs rise significantly, and contract terms and conditions permit a supplier to pass through the increase. Obviously suppliers will reluctantly re-visit prices mid-contract. The burden in terms of damaged customer relations and additional administration work will increase the reluctance to re-visit prices. Contact Direct Power today and be ready to share a copy of your current contract for guidance on your particular case.
New Contracts:
Securing contracts for a near term start date will benefit from lower commodity costs, but will be impacted by higher forecasts for third party costs. The price you see on your bill is made up of multiple components, roughly 35% commodity costs, which are now lower than pre-crisis, and 65% third party costs, which on the whole are more expensive than pre-crisis.
Read the fine print!
Network Costs are set annually in advance, so the impact of COVID-19 will not be felt until April, 2021. Network Costs include:
DUoS (Distribution Use of System): Electricity Distribution – covering the cost of the local distributors regulated costs including upgrades to enable two way “smart grid”.
TNUoS (Transmission Network Use of System): Electricity Transmission – covering the cost of National Grid’s electricity transmission grid.
Gas Network: Gas Distribution & Transmission – covering the cost of maintaining and developing natural gas distribution and transmission networks.
Policy/Green Costs are set daily or quarterly in advance, so the impact of COVID-19 will be felt in the nearer term. Policy/Green Costs include:
FiT: Feed-in-Tariff – to encourage small-scale (incl. domestic) renewables through a fixed additional subsidy.
RO: Renewable Obligation – rate applied in each Half Hour throughout the year to fund large scale renewables through a fixed additional subsidy.
CfD: Contracts for Differences – A relatively new scheme supporting large scale low carbon generation by guaranteeing revenues.
System Costs include:
BSUoS & Imbalance: Balancing Services Use of System & Imbalance – covering system balancing costs including black starts, frequency response.
Capacity: Capacity Mechanism – charge to provide system security by paying generation assets to be available.
Contact Direct Power today for bespoke assistance and guidance on your upcoming renewal. We are living through uncertain times, but we are here to help you on the energy front. There are opportunities to secure great contracts, especially on the gas, so get in touch to bring some positivity to this situation.
