In an email to customers sent out this week, Norgesenergi, one of the country’s largest electricity companies, comes with an offer for something they call price hedging.
After a winter with the highest electricity prices ever, customers are offered to tie the price for only two months – more specifically in March and April. It is common for the fixed price to be slightly above the market price (spot price) – Norgesenergi has, however, ensured customers a solid surcharge:
Customers in southern Norway can tie the power for two months at DKK. 1.50 including VAT. Customers in northern Norway avoid VAT on electricity, and can thus tie the electricity to DKK. 1.20 / kilowatt hour.
In northern Norway, the market price for electricity has been 12-15 øre per kilowatt hour, so to speak, throughout the winter.
Norgesenergi’s offer to customers is thus that they can secure a price eight times higher than the market prices in the coldest months.
In Norway south of Central Norway, prices in the last week have been a little over a penny per kilowatt hour, according to the power exchange Nordpool. Nasdaqs systempriser for the next two months (Nordic average in the power market), is just over 60 øre for March and April. With this as a starting point, NOK 1.20 (plus VAT) probably a high price to pay for electricity until the spring also in our southern parts of the country, although weather conditions and unrest in Ukraine can affect prices.
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– Plays on fear
– It appears to be a very, very expensive security, says Thomas Iversen, senior adviser in the Consumer Council.
He finds it difficult to see any other logic in pricing than to get extra well paid for the power:
– Customers are already secured with a compensation scheme for March. The offer, especially for consumers in northern Norway, is sky-high above the prices in that area this winter. So this does not look like anything other than an attempt to capitalize on people’s fears of high electricity prices, in an attempt to get customers to pay very much more than they need.
Norgesenergi is one of the largest electricity suppliers in Norway. In 2019, the company sold electricity for more than NOK 3 billion. This fell to about half in 2020, when electricity prices were extraordinarily low, but the profit increased from 190 to 250 million kroner.
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– Wait until the summer
It is normal for prices to fall in late winter and spring, and in light of this, the fixed prices that Norgesenergi offers in March and April seem very high, Iversen believes.
– I would like to hear what analyzes Norgesenergi has done to arrive at this award. It is admittedly free pricing in this market, but how do they justify this to customers?
Iversen thinks it makes more sense to consider fixed-price offers for the summer.
– No one predicted the prices we have had now, and it may be that a fixed price will be a much more real alternative for many. We can hope that there will therefore be sharper competition to reach customers with good fixed price agreements in the future. Then the competition will work to the advantage of the customers. But I would never tie the price of electricity at today’s high level, says Iversen.
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– Expect them to clear in this
Norgesenergi AS is one of the companies that is certified under the industry scheme Trygg strømhandel.
“The goals of the scheme are a safer and simpler electricity market, that the electricity suppliers become better suppliers and that customers increase trust in the industry and in the individual supplier”, write Energi Norge and Distriktsenergi, who are the initiators of the scheme, about the scheme.
But the industry organization with (that in this context confusing) the name Energi Norge is not completely satisfied with this offer from Norgesenergi:
– It goes without saying that this is an unfavorable offer to customers in northern Norway. We hope as long as it is due to a work accident at the supplier, and expect them to clean up the matter and withdraw the offer, says information manager Aslak Øverås in Energi Norge.
He adds:
– We expect that DNV, which administers Trygg strømhandel, will ask for an explanation from the company and assess whether there is a basis for a reaction. Customers must be able to trust that they receive competitive offers from certified suppliers.
– Will provide predictability
Norgesenergi asks for answers to our questions in writing, but ends up giving a general comment. Here are Nettavisen’s questions:
- How many have received this offer?
- How many customers does Norgesenergi have?
- Why do you offer a fixed price for two months?
- How many have accepted the offer of price hedging?
- How many have “secured the prize” in northern Norway?
- Have you secured yourself?
- Why should people secure themselves at such high prices?
- What analyzes are the basis for offering customers in northern Norway electricity at 1.20 – which is about eight times more than the market price this winter?
- This is coming now, after a winter with the highest electricity prices of all time in southern Norway, but not in northern Norway – Do you mean the Consumer Council is trying to capitalize on people’s fear of high prices – what is your comment on that?
Norgesenergi responds via its communications manager Geir Arne Gundersen, who writes in an email that the company does not want to go out with customer numbers for business reasons and therefore will give a general comment:
– There are many customers who in addition to a good electricity agreement want to get a more predictable electricity bill by tying the price in certain periods of the year without having to commit for too long. With Price Assurance, the intention is to reduce the risk for the customer and that the customer should not worry about very fluctuating and high hourly prices, Gundersen writes in the email.
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He states that the price of electricity has been historically high in recent months and that prices have varied greatly.
– We have a great understanding that customers find the situation demanding and we do what we can to help customers who experience problems.
Has not separated the regions
According to Gundersen, customers themselves have requested the offer Norgesenergi now offers:
– In autumn and winter, we have experienced increased demand for price hedging. Price hedging is first and foremost about contributing to predictability for electricity costs, but since spot prices varied so much this autumn, it was also profitable to tie the price in from September to December for customers in southern Norway.
That northern Norwegian customers thus receive an offer that corresponds to eight times what they have paid this winter, he explains that the offer has not been price differentiated. After being presented with the criticism from Energi Norge, Norgesenergi acknowledges that the offer should be changed and should not be sent out to customers in Northern Norway (price areas 3 and 4):
– Yes, this was an offer that should never have been sent. We will ensure that no customers in price areas 3 and 4 use the opportunity to tie the price for the next two months.
– The price differences we have seen this autumn and winter between north and south have been absolutely extraordinary. We have not offered differentiated prices for Price Hedging before since there has been no need for it, and see that this offer should never have been sent out to customers in price areas 3 and 4. In addition, we work to be able to offer differentiated prices for the next fixed price period.
Beyond this, Gundersen does not want to comment on the statements from Thomas Iversen in the Consumer Council.
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– Does not benefit consumers
In Nettavisen recently, Klarkraft director Haakon Dyrnes spoke in favor of tightening the market sharply and regulating away everything other than pure fixed price and spot price agreements.. Iversen is also skeptical of the trend of offering customers many different power agreements:
– They call it innovation, but it does not benefit consumers. The consumer has no advantage in that companies have many different spot price agreements at different prices. Too many electricity deals out there confusing for customers.
The Consumer Council warns against so-called variable price agreements in its price portal.
– You rarely get this good, the agreements are worse than both spot and fixed over time. Maybe there will be a need for new regulation over time, says Thomas Iversen.
Øverås in Energi Norge also believes that there may be reason to consider fixed-price agreements this summer:
– In general, we believe more customers should consider fixed-price agreements to ensure a more predictable electricity bill, but we have been clear that it pays to wait until prices fall during the spring or summer.
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