Thursday 18th of April 2019 | Posted In: Energy saving, Buy and Sell, Buying energy

When is the best time to sign a fixed contract?

Simply put… there isn’t a steadfast rule to this and it isn’t always in the summer which is a common misconception.

In the contracts team, we help NFU members procure thousands of contracts every year. Our customer’s supplies range from small farm buildings to large pump houses, vegetable stores and poultry sheds. The importance of a good, fair price remains the same and picking the best time of year can be tricky.

What can cause energy prices to rise?

To first understand when to expect lower prices, we need to think about what causes prices to rise. The energy market can be a pretty volatile place, however, some of the main drivers for price are:

Supply shortages

Whether it’s nuclear, renewable, gas, oil or nuclear shortages can create uncertainty.

Short term demand

In the short term if there is a significant increase in the need for heating, cooling or lighting.

Long term demand

Overall demand is ever increasing in the UK and the requirement to support new technologies such as an increase in electric vehicles will definitely require more energy.

Third party costs

Around 50-60% of the unit rates you pay on your electricity bills are made up of third party costs. These are made up of various charges set by distribution and the government to cover the cost of getting the energy to you, supporting generation and regulatory charges. These costs are revised every April and usually go up.

Weather conditions

Though high winds can increase wind turbine generation and rain and snow can help with hydropower generation, extreme temperatures can affect the demand for electricity and gas for both cooling and heating.

Coal, Carbon and Oil prices

A rise in costs for these can increase the cost to generate electricity and demand for alternatives.

Financial market

In periods of financial instability such as recessions and even Brexit negotiations a drop in the value of the pound can create volatility.

Political unrest

Political changes that may affect energy sources worldwide can create uncertainty and volatility.

World events

Wars, unrest and natural disasters can wreak havoc on the energy market –particularly if they’re happening in areas close to fuel sources or generators.

 

Demand is lower in the summer so surely that’s the best time?

Typically it would seem right to assume that with so many unpredictable factors, wouldn’t it make sense to aim for the summer when demand is at its lowest? Unfortunately, if we look at past years, it’s still not that simple. During heat waves demand for both domestic and commercial cooling increases, which can bring prices up rather than down.

 

 

 

 

 

 

 

 

So what can I do to try and get the best fair price?

Terminate your contract early

If you find a great price with another supplier, you need to have terminated your contract to be able to move. Most suppliers need notice 30 days before your contract ends, but we recommend doing this as early as possible to make sure you can move when you want to.

Keep on top of your bills

Again, if you want to move for a better price, your existing supplier can stop you from moving if you have an overdue bill. We recommend using our account managed service so we can keep on top of them for you.

Start negotiating at least three to six months before your end date

Non-Half Hourly prices: We can provide prices on any given day and recommend giving us a call around three to six months before your renewal. Leaving it too close to the end date could leave you without enough time to transfer supplier for a better price. Read more about matrix pricing https://www.nfuenergy.co.uk/services/matrix.

Half Hourly supplies: This can take around two to three weeks during which time the market can fluctuate massively. We recommend tendering a price with us nice and early and signing up to our Energy Weekly email to see if the prices change. If you want a refreshed price to react to a change in the market, we can do this quickly. Read more about Bespoke negotiations here https://www.nfuenergy.co.uk/services/bespoke

Half Hourly supplies with over £50k annual spend: It may be worth considering spreading the purchases of your energy rather than relying on trying to get a good price on one day and locking it in for the entire contract. Read more about our flexible contracts here https://www.nfuenergy.co.uk/services/flexible.

If you would like more advice please give my team a call on 024 7669 8885.