Take a look at our Energy Market Analysis from the end of February and into March, and perhaps not surprisingly, freezing temperatures were among the key topics of discussion.
Below average temperatures tightened gas supplies and demand was significantly above the seasonal norm with the National Grid requesting additional gas flows from Europe.
Storm Emma and the Beast from the East resulted in freezing temperatures that were significantly below what’s normally expected for the time of year.
Cold outlooks and drops in temperatures impacted on prices and there was significant volatility in the market place as winter seemed pretty determined not to loosen its grip.
According to the Met Office’s Climate Summary for February, the coldest temperature recorded was -11.7C in Hampshire and the deepest snow in County Durham at a depth of 21cm.
So as we prepare for the official start of British summertime and hopefully put winter well and truly behind us, what does all the cold weather mean for contract renewals?
When our energy consultants go out to the marketplace to re-tender for gas and electricity contracts, past consumption plays a key part in assessing future need.
A severely cold winter can artificially inflate volume profiles and impact on the negotiation of future contracts. Supplier contracts may include a take or pay clause, usually 80/120%, this means that if you don’t use 80% of the annual quantity which is based on the last 12 months usage, then you may be expected to pay up to 80% of the usage even though you haven’t used the gas or electricity. If you go over 120% of your contracted volumes you may be expected to pay for the usage over 120% at market rates, not your contracted rates. There are ways to negotiate with suppliers in these circumstances which eliminate or minimise the impact of these costs.
For clients using our Bill Validation, we can be much more informed and accurate with budgeting and forecasting. Our bespoke software not only reviews and recalculates each component of an invoice and matches contract rates and consumption with invoice details, it also flags where usage exceeds or falls below what we would be expecting for the given billing period. All this information is key when negotiating future contracts.