Energy prices for 2023. What should you know before signing a contract?



Arkadiusz Somnicki

Member of the Board

Entrepreneurs who want to purchase energy for 2023 are currently receiving (early February 2022) offers at the level of PLN 750-800 / MWh. Such prices are offered primarily to larger companies. Smaller entities must take into account prices of up to PLN 1,000 / MWh. Before we sit down at the negotiating table with energy sellers, we should find out what the current level of the electricity price results from. This knowledge will allow us to conduct effective negotiations with sellers and ultimately obtain a lower purchase price

Each of the sellers calculates energy prices based on their own contract pricing models. Due to the fact that the prices offered to companies often differ slightly, it can be assumed that a large number of sellers use valuation models based on current market (stock exchange) indicators.

The main parameter taken into account when valuing electricity is energy itself. The current stock exchange prices of the base contract (BASE) for 2023 are at the level of 645-650 PLN / MWh (this is approx. 85% of the final energy price). A year ago, the same contract was paid around PLN 260-270 / MWh. There are reasons to lower the prices of the baseline contract in the second quarter of 2022, however, it should be borne in mind that the market has surprised participants more than once - and instead of a price thaw, the energy crisis in Europe may deepen. Entrepreneurs should consider whether it is worth accepting an energy purchase proposal based on an indexed offer now and, when purchasing in subsequent tranches, secure the price for next year (statistics suggest that using such offers does not guarantee the purchase of energy at the lowest price that will be available). on the market during the entire contracting period, however, in most cases, it effectively protects companies against purchase at the time of the highest prices).

High volatility of energy prices forced sellers to increase the level of risk calculated in the price of energy. A year ago, the risk of price volatility was calculated at the level of a few PLN / MWh, and in recent months its valuation has increased to several dozen PLN / MWh. Due to the fact that in the second half of 2021, daily changes in energy prices on the exchange reached even several dozen PLN / MWh, in order to limit the negative effect of price volatility during the offer validity period, offers valid for a few or even one hour have become a standard (for such offers , some sellers used zero risk of price volatility). Risks related to the unstable market situation are also included in increased margins of sellers.

Read more: How does rising energy prices increase sellers’ profit?

Due to the fact that the real electricity demand curve in the case of most entities is very different from the profile of a "flat" band contract, sellers make energy valuations, e.g. at peak hours (the current price of the "peak" product for 2023 is approx. PLN 835 / MWh) and add it to the band contract price. At the same time, sellers make a valuation of the recipient's future balance (the actual energy consumption differs from the planned one - companies use more or less energy in particular periods).

The current valuation of the above-mentioned parameters, i.e. the risk of price volatility, seller margin, recipient profile and its balancing, in the case of larger electricity recipients it is at the level of PLN 60 / MWh.

Property rights are also subject to valuation. The current valuation of the entire rights package (PM OZE_A, PM OZE-BIO, PMEF_F) is 55 - 60 PLN / MWh.

The final price of energy also includes the excise tax, currently amounting to PLN 5 / MWh.

In the case of larger entities, a well-prepared energy purchase strategy, taking into account the knowledge of price shaping mechanisms, translates into annual savings ranging from several to several dozen million zlotys. Regardless of the amount of energy consumed, we encourage every entrepreneur to carefully analyze their bill. Many years of experience in the area of ​​electricity and natural gas sales prices gives us the basis to say that there is always room for price optimization.

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Are you an entrepreneur? Are you interested in securing energy and gas prices for 2025 and subsequent years? Are you watching the situation on global markets with concern and wondering how the possible development of the geopolitical crisis may affect media prices?

Enfree Webinar - Discover Savings: Strategies to Reduce Energy and Gas Costs.

June, 6th 2024 | 11:00 - 12:00

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Arkadiusz Somnicki and Adam Wlizło will present proven strategies and innovative solutions that generate real savings.

The agenda includes,among others:
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💡Q&A session.

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