26.11.2021

Pricing in the energy sector. Knowledge worth millions.

Tags

Author

Adam Wlizło

Member of the Board

One of the most important analyzes in assessing the company's condition is pricing power (the ability to achieve satisfactory price levels). If you can raise your prices and not lose customers to the competition, you have great business. If you have to go and pray before every one-tenth of a cent increase, you have a terrible business ...

If we were to assess the condition of the Polish energy sector based on the thesis @Warren Buffett cited above, one would have the impression that the national champions are doing great. And it probably is so, since the market shares of the main (state-owned) sellers have changed slightly over the years, regardless of the pricing strategies implemented. The experience of the last 15 years in electricity trading allows us to conclude that most sellers use the practice of average (let's say - market) prices, but there are also those whose pricing policy always assumes selling at high prices. The latter can admit that the strategy of high prices (despite selling the same electricity with service quality not different from competitors) is a bull's-eye, since numerous price increases did not contribute to the decline in sales.

From the customer's perspective, things are completely different. It was, is and will be expensive. It is quite a popular statement of entrepreneurs, but also of most of us, "household members". "Sellers take advantage of their quasi-monopoly position and dictate conditions that cannot be opposed." Well, you can, at least in part. Let's try to look for cheaper alternatives to purchase energy on the market (this also applies to gas). There is always a chance to find a cheaper (and more importantly - reliable) seller.

Knowing how low the real rate of customer losses and gains is, energy companies now have the power to dictate price conditions freely. They also do not have a strong enough incentive to improve their cost-effectiveness and make the offer more attractive. The @URE data show that the number of customers from G tariff groups (~ households) who changed their supplier from 2007 to September 2021 was only 713,000. (in Poland we have about 15.4 million of them, which means that only about 5 out of 100 Poles wanted to take advantage of the benefits of the liberalized energy market). At the same time, the number of entrepreneurs (customers from A, B and C tariff groups) who changed their supplier in the same period is 222,000. out of 2.4 million (approx. 9%).

See also

More news

18.05.2022

Purchase of energy from renewable sources. How to protect the company against increases?

The purchase of energy from renewable sources has gained in importance over the last year, because the so far leading ecological emphasis has been supported by a very strong partner - the financial aspect. Over the last year, the purchase of "green" energy (often based on long-term cPPA contracts) has become strongly competitive with the purchase of energy from the power exchange, the prices of which have experienced a threefold increase y / y (one of the main culprits of the current increases is the situation on the coal market). The energy prices offered to companies in the last days for 2023 exceeded the level of PLN 1,250-1400 / MWh (rates vary depending on the characteristics of the recipients; let us remind you that in 2021 entrepreneurs were buying energy on average at PLN 300-400 / MWh).

Read more

15.04.2022

About the purchase of natural gas based on offers indexed with the forward market prices

According to the data of the Energy Regulatory Office, since the beginning of the liberalization of the gas market, the gas supplier has been changed by 281 thousand. with approx. 6.5 million of all recipients (as of Q3 2021), of which only 5% were industrial recipients (tariff groups with markings from W5 to W10). The PGNiG Group is the undisputed leader in gas sales in Poland, with a market share of approximately 85% in 2020. We will soon find out how the current situation will affect the new distribution of market shares (according to the ERO data, at the end of 2020 in Poland there were approx. 90 companies actively involved in trading in natural gas, with 185 entities having a license to trade in gaseous fuels. ).

The decision to change the seller is influenced by the level of customer awareness and their motivation to change (nowadays mainly the level of the offered price), as well as the ease of making such a change (no complicated procedures) and the availability of competitive offers on the market.

The prices of gas fuel offered by various sellers often differ by several or even several percent, and a significant increase in price differences has been observed since the outbreak of the war in Ukraine. Most sellers set prices based on the current gas exchange quotations, adding excise tax, the cost of the so-called white certificates, margins but also mark-ups, which play an important role in recent months, allowing to secure the commercial risks of sellers. The current gas prices for 2023 listed on the Polish Power Exchange exceed the level of PLN 465 / MWh (updated on 04/25/2022), which means more than fivefold increase in prices over the last year.

Read more

31.03.2022

The DSR service as an opportunity to increase the cost effectiveness of enterprises

The essence of the DSR (Demand Side Response) service is the reduction of electricity demand by consumers during peak demand hours, at the request of the transmission system operator, which in Poland is Polskie Sieci Elektroenergetyczne. DSR is one of many remedial measures used by the grid operator to maintain the stability of the National Energy System.

Why is it worth using a DSR service? First of all, in order to obtain additional remuneration. Recipients who have reported the possibility of reducing their capacity by 1 MW receive annual remuneration in excess of PLN 100,000. Due to the fact that the remuneration obtained in most cases does not involve any additional costs, its attractiveness is high. It is worth mentioning that entrepreneurs participating in the DSR program, in addition to rationalizing individual electricity costs, contribute to the development of innovative products on the electricity market serving the entire economy.

Read more