Like any other traded commodity, the energy markets experience fluctuations in price which are determined by a variety of factors. The volatility of the energy markets is ultimately responsible for the fast-changing electricity prices which affect how much you pay for your utility bills.
Whilst for residential home-owners there is very little that can be done to respond to the volatility of electricity prices apart from to switch electricity supplier, business customers have much greater control over their energy purchasing power.
Business clients are offered quotes from electricity suppliers based on the wholesale price of electricity at any given time on the market. If you are responsible for managing your company’s utility bills, finding the best electricity prices based on when market wholesale prices are at their lowest is quite a skill.
The people who determine wholesale electricity prices are market traders who analyse the relative supply of electricity against current demand. If there is a surplus of electricity when demand is low, then the wholesale price will go down. On the other hand, if demand is high and there is a shortage of supply, then prices will go up.
The relationship of supply and demand is affected by many things, although it is mainly driven by the price of related commodities, such as oil and gold. Other factors that can alter the relationship include weather forecasts, the current state of the economy and key international events such as political unrest, war or natural disasters. Such is the volatility of the energy markets that wholesale electricity prices can fluctuate by up to 5 per cent in any one day, so much so that electricity prices, halved in the final quarter of 2008.
With such volatility, it is important for businesses to be ready to capitalize on a good price while it lasts. Energy suppliers will quickly withdraw quotes that are not accepted if the price of electricity jumps. With this is mind, make sure you read all the terms and conditions of a supplier’s standard quotation before getting a quote. Do as much preparation beforehand as possible. Shop around for a good quote but do not deliberate once you find a reasonable price – send a reply as soon as possible to be certain of securing the best deal for your business.