The government has invested heavily in the autumn fixed price agreements for business customers on the electricity market to compensate for high electricity prices. Industry Minister Jan Christian Vestre hoped agreements below 70 øre per kilowatt hourbut soon after launch in December it was practically zero interest in the agreements.
Potentially several tens of thousands of companies could enter into such agreements, but for the moment we are talking about alcohol levels that have complied. Fortum is one of the largest electricity suppliers in the corporate market, with many large customers. But at the start of the year, there was minimal interest in setting the price of electricity for three, five, or seven years ahead.
— We have sold eight fixed-price deals so far with delivery beginning January 1, communications manager Kristian Myrseth told Nettavisen. He says that, with the exception of one customer with significant annual volume, they have an average annual contract volume of 1 GWh for customers, or 1 million kWh.
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According to Myrseth, most of the seven-year contracts have been sold and no three-year contracts. There is an even distribution between flat (constant consumption) and seasonal profile, electricity consumption which varies throughout the year. These chords are slightly more expensive than chords with a flat profile.
– The lowest price deal is the one you made with a customer in Northern Norway for approx. 36 hours/kWh. For Southern Norway, the lowest price deal was made at 83.46 øre/kWh for seven years, excluding VAT, says Myrseth.
Fortum does not have any restriction that customers can only enter a deal for 70% of the expected consumption (see below), they can guarantee up to 100% of the consumption. Clients have to pay the short-term market price, the spot price, for uncovered volumes.
– The agreements that have been concluded have different degrees of security. It is therefore difficult to establish an estimated average total price for deliveries.
– Within each month, consumption will in any case be distributed uniformly over all hours. All customers with such agreements will experience periods where they consume more or less than the volume of the agreed fixed price. This consumption then has to be adjusted against the spot price, says Myrseth.
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He wants predictability
– Which customers have entered into fixed price contracts?
– The greatest interest is naturally from customers with the highest consumption. The cost of energy for these customers usually makes up a larger percentage of the total cost picture than for other companies. So there’s a greater need for predictability, Myrseth replies.
At the main competitor Fjordkraft, the interest in setting the price of electricity was slightly higher.
– From the beginning of the fixed price agreements, in December, until the end of the year, 39 companies entered into an agreement. Most chose deals for seven years and only a couple of companies for three years. There are no major electricity consumers, but it can generally be characterized as ordinary businesses of various types, says Fjordkraft communications director Jeanne Tjomsland.
And now Fjordkraft’s prices are falling to comfortable levels, but this mainly applies to customers from northern and central Norway. They may, somewhat depending on the electrical profile, commit to 40-50 øre per kWh for the next three to seven years at up to 70% of consumption. For the remainder, customers have to pay the short-term market price.
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Southern customers, on the other hand, now have to shell out well over NOK 1 per kWh for three- and five-year contracts, but can hope for prices from the summer of NOK 90-1. For seven-year contracts, the prices are even lower.
Espen Fjeld in Energy Sales Norway has he has repeatedly been skeptical of the new fixed-price deals. Faced with falling prices, he tells Nettavisen:
– Fixed prices decreased in line with the decline in the underlying market price. There is probably still some time before we see the three-year deal well below NOK 1 per kWh, but it is moving in the right direction. As expected, few companies have chosen to lock in electricity costs for seven years at these price levels, but there will always be individual companies who will see it as right for their business.
More flexibility
Importantly, Fjeld says, it’s also possible to capture the price level if you enter into more traditional deals with electricity suppliers. Then customers can quickly start a dialogue with the electricity supplier about a more personalized profile and flexibility.
– Flexibility in this context means being able to reduce the degree of price protection if there is a clear expectation that the market price will fall again.
Jeanne Tjomsland says that so far about half have chosen a flat profile. Other business clients chose a profile with higher withdrawals in winter than in summer. Fjordkraft only offers a fixed price up to 70 percent of the total. The part of the consumption that is delivered spot follows the hourly prices throughout the day at all times.
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Rationalization
– Why do you only offer up to 70 percent insurance?
– In the years to come, there is reason to believe that a part of the business world will take steps that will result in less consumption from the electricity grid through energy efficiency and own production. It is to be expected that many companies will take steps to reduce electricity consumption within three, five or seven years.
– Having a certain volume at the spot price also offers the opportunity to shift some consumption to the cheapest hours. The energy market in general is also at a very high level and we would not recommend 100% coverage in the current situation, replies Tjomsland.
He adds that many companies track consumption hours and use follow-up tools and programs to shift consumption towards the most economical hours.
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New tax rules
Things have started to look up for Lyse Kraft, which has offered the most favorable contracts so far, with prices below 80 øre per kWh for the longest contracts. However, the prices charged to selected customers within their market area and up to 70 percent of consumption with a flat profile.
Lyse Kraft communications manager Atle Simonsen tells Nettavisen they have been working to change the tax rules so they can offer better fixed-price deals.
– We had a large turnout, with a lot of interest. In five days we signed fixed price agreements with almost 80 different companies. It was more than we expected in advance. We think it’s because we had the lowest prices of those who launched fixed-price offers, Simonsen says.
Great reach
Customers have entered into three-, five- and seven-year contracts for both fixed and seasonally adjusted consumption. According to Simonsen, the clients who have signed the agreements range from local hairdressers to large industrial clients.
– Why does Lyse Kraft only offer screening for 70 percent of consumption?
– This is both because it allows us to offer cheaper prices and because we want it to always be advantageous to save electricity. It also means that customers get some upside if electricity prices are lower, responds Simonsen.
60 percent of customers with fixed-price contracts have chosen a seasonal profile. Half of the customers have committed to the next seven years and thus get the lowest prices.
