Capping energy prices is not a solution, the price will, on the contrary, increase, the analyst claims

Capping energy prices is not a solution, the price will, on the contrary, increase, the analyst claims
Capping energy prices is not a solution, the price will, on the contrary, increase, the analyst claims

Jan Béreš, energy analyst of the Ušetř portal, talked to us about price ceilings, the situation on the energy markets, what companies and households should prepare for in the coming months, and how important it is to read the contractual terms and conditions.

Energy prices are rising sharply, where do you see the biggest problem, what to prepare for in the coming months?

The biggest problem is currently in the stock market, because there the price is really breaking records and no one knows where it might stop. Therefore, I would divide the answer into 3 categories. The first relates to the stock market, the second to suppliers and possibly also to how the end customer should behave at the given moment. The stock market is now heavily influenced by the price of gas – it also affects the price of electricity, because generally every state has some sort of backup power plant. In addition to nuclear and coal-fired power plants, there are also back-up, gas-fired power plants – these usually have the highest costs, which is why these power plants determine the price of electricity. The way it works is that for one megawatt of electricity you need 2 megawatts of gas and a third to a half of the emission allowance, plus some handling fees. This currently results in a price of over 500 euros per megawatt of electricity and around 215 euros per megawatt of gas. The outlook will now be determined by how the energy situation between Russia and Europe will develop. As for the suppliers, they gradually buy at the current price, which is already within the mentioned ranges, and therefore the price lists will be updated in the coming weeks and months and the prices will rise significantly. As for the customer, the behavior at this time should be to check their contract. Find out exactly how it works and start solving it in time. Ideally, if his contract ends within a year, he can already sign a new one with another supplier at the current price that will be paid to him from the start of delivery.

So it’s ideal to check it as soon as possible, and above all to fix it.

Yesterday was late, so to speak.

And if someone has to change suppliers for some reason or is considering where to buy electricity, how do they know that the supplier they have chosen is not likely to go bankrupt? Is there any way to know it?

Certainly. The so-called big five operate on the Czech market – these are suppliers who are also distributors of individual commodities. There is the greatest probability that it will not end. For alternative suppliers who do not have any distribution, it is purely about the business – how much they will buy for, how much they will sell to the customer and whether they will have customers at all.

Energy is really expensive these days, but is there any way customers can save and get better terms?

More favorable conditions are currently purely about the price, because at the moment electricity prices of around 6 to 7 thousand per megawatt can be found and fixed for 2 years. For gas, the price is around 3,000, but in the future next year it may be over 6,500 per megawatt hour. For electricity, easily 12.5-14.5 thousand. So it’s definitely worth solving it now, while the price lists are still there.

Today, it is common for some operator to call people and ask how they are doing with energy, and he wants to impose his services on them. What should the person in question look out for and how can he recognize that it is a company that really has a stable, large team behind it, and is not some scammer?

Let them listen to the offer, but most importantly, they must have it sent to their e-mail, where there will also be a header of the company, which you can then Google on the Internet and check whether it is really a solid company. If it is only an intermediary on the basis of a power of attorney, or if it is a supplier directly. And also look at its history and check how long it has been operating and whether it has satisfied customers.

We will probably have a little colder winter at home this year, but how do you think companies will deal with this situation? What awaits them in the market due to high energy prices?

For companies, I would divide it into 2 categories. Firms of the type of office buildings, where the consumption is not so great, can still be found and fixed some relatively decent prices for the 2 years ahead, for example. For larger production companies such as bakeries or engineering, where energy is needed directly to generate profit, it will be very difficult to obtain such contracts, because their suppliers look at the current price on the market, and here, unfortunately, there are no such positive options.

Is there any way the state could help to make it easier for people and companies?

Any help is good. However, I think that the general assistance with the social tariff is a bit unfortunate at the moment. It would certainly like to target the neediest groups at risk of poverty or single mothers and pensioners who live in rented accommodation. There, it would like more targeted help and, according to the bill, to contribute even a larger amount of money. For companies, especially manufacturing ones, there is a need for direct assistance from the state – to cover most of the costs.

Where could the state look for resources to help the needy?

Currently, the biggest source where money could be raised during the following year would be the dividends that ČEZ now has. And this money should be used for more targeted help to specific groups, because higher tens of billions are also involved there. And this can be another resource to help customers. At the same time, the Czech state could use its current position in the presidency of the European Union and put pressure on it to issue more emission allowances – this could also help in reducing overall prices.

And wouldn’t capping prices help, so how are they doing in Slovakia?

I do not think that this is a long-term solution, because these countries then have even greater costs, and the aid is not in the order of tens, but hundreds of billions. This is de facto not sustainable for the state, or it is not even in its power. Therefore, these countries could be threatened with some kind of energy poverty and it could affect the price even more, i.e. would be higher.

So far, we have mainly talked about this year. But what do you think are the prospects for the years 2023 and 2024 regarding the price of energy and gas?

According to the long-term contract price exchange, it does not look good at all, because it is currently being bought at least for the calendar years 2023-2024 already, and there the price is moving at this level. Electricity around 500 euros, gas around 200. The outlook for the next two calendar years is therefore generally not positive at all.

And finally, is there a way that people could prepare for this period so that they can really withstand the situation?

They should know the terms of their contracts and, if necessary, sign a contract with another supplier in advance, because changing suppliers can also save a considerable amount. Each supplier allows its customers, whether new or existing, to sign a new contract with some advance notice. That is why I personally always recommend to clients to get the first information at least a year before the end of the contract, so that you know how the price is moving on the market. And if you have a good source of such information, it will help you find out how the prices look like in the future for the following years. Now is a good time, sign a supplier – let it be a big, stable company that has a good price. It will definitely be better for you than staying where you are and waiting to see what your supplier will do for you on the price for the next contract period. If you don’t know the terms of your contract, you may not be so satisfied in the future when there is an automatic extension. Ideally, every six months, you should find out what the situation is, how much the prices are rising and how it affects suppliers.

While it doesn’t look like the conflict in Ukraine is going to end yet, if it does in the near term, could that cause prices to go down again?

If such a situation were to arise that the conflict would calm down in the foreseeable future, it could certainly have a positive effect on the price. But I think that Europe is currently set to get rid of dependence on Russian gas, and therefore they will also look for alternative sources, see liquefied gas from America, from Algeria, Qatar. And where possible, some other sources that could supply us with gas to Europe. However, for example, the price of liquefied gas is still between 200-300 euros per megawatt, so even thanks to these sources, in the long term, it doesn’t look like the price should somehow drop to the level we were used to last year, for example.

Author: editors

FocusOn is a news website focused on new trends in the economy with an emphasis on the use of modern technologies.

The article is in Czech

Tags: Capping energy prices solution price contrary increase analyst claims

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