Electricity contracting – Why market timing is key

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What the vast majority of businesses may not know about electricity contracting.

  1. You can in fact secure your electricity agreements in advance. 

For example, if a business has a contract in place until 31/12/2022, then they could secure a contract that began 01/01/2023, months or even years prior to the start date.

  1. The wholesale price of electricity fluctuates by up to 5c/kWh most years. This is due to the imbalance of supply & demand in the grid.

Market timing with electricity contracting is key to making big savings

Most businesses simply renew their electricity contract when their current contract is approaching the expiry date.

Some may renew in the winter months hoping for lower rates due to lower seasonal demand on the grid.

For example, let’s look at two different scenarios whereby John & Dave are both looking to secure their next electricity contracts.

Scenario 1

John goes out to market two weeks before his current contract ends, when the wholesale price of electricity is around 11c/kWh. Retailers add their retail margin on top before handing John his rates. Retailers provide John with quotes around the 11-12c/kWh mark.

Scenario 2

Dave has been keeping his eye on the wholesale prices and noticed that prices were really low around 4c/kWh, but he still has 12 months left on his current contract. Dave decides to go out to market for his next contract in advance whilst the prices are at 4c/kWh. The retailers add their margin to the wholesale price, providing quotes around the 4-5c/kWh mark.

Dave’s rates are more than 50% less than John’s, because Dave has been reading the Leading Edge Energy’s market updates each month and keeping track of prices.

The below graph shows the historical wholesale electricity prices going back to 2015, which fluctuate drastically and regularly. This highlights why it is imperative that a business tracks the wholesale market so that they can secure their future contracts when the prices are low.

Source: Leading Edge Energy – Futures Data

So how does a business secure low rates?

Step 1 – Ensure you know for how long you are contracted out into the market

Step 2 – Track the electricity market – Subscribe to our monthly Energy Market updates to keep up to date on price movements

Step 3 – When market prices fall to a low point, go out to tender for your next contract (futures contract).


Why choose Leading Edge Energy?

Leading Edge can help you with the above steps as we did with our client Dolphin Products securing them savings of 28% on total energy spend, reducing their retail rates by more than 55%.

As an established energy broker with a proven track record, we track the market so we can guide you in securing the most advantageous prices for your business.

Subscribe to our energy market updates for up-to-date wholesale electricity market analysis.

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Mike Carabott and Ewen Beard
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Ewen Beard
Energy Management Consultant
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