ACM’s energy monitor: new fixed contracts are up to three percent more expensive

The prices on offer for fixed contracts for natural gas and electricity this month are 1.5 percent to 3 percent higher than last month’s prices. This month’s prices for variable contracts remained largely the same as last month’s prices. This has been revealed by the Monitor on the consumer energy market of the Netherlands Authority for Consumers and Markets (ACM).

Due to the cold weather and the unsteady geopolitical situation, prices on the wholesale market for natural gas have risen to €54/MWh. Households with dynamic energy contracts will see these kinds of price increases (and price drops) immediately reflected in the prices that they need to pay. With variable contracts, the prices that households need to pay gradually follow the developments on the energy markets, both up and down. With fixed contracts, prices are fixed for the entire contract period.

Energy suppliers use different purchasing strategies for their fixed and variable contracts. With fixed contracts, suppliers purchase natural gas and electricity often close to the contract offer, for the entire contract period. In this way, suppliers cover themselves against the risk of rising energy prices (called hedging), and, at the same time, consumers are guaranteed a fixed price for the entire contract period. Since purchasing for fixed contracts often takes place closer to the start of the contract period, any developments on the wholesale markets are reflected sooner in new fixed contracts.

With variable contracts, natural gas and electricity are often purchased much earlier, yet for a shorter supply period (for example, one quarter). If energy prices subsequently go down, the purchasing costs also go up for the next supply period, and the supplier will raise the variable rate. In that case, consumers are not guaranteed a fixed price. Consumer prices follow developments on the energy markets, both upward and downward trends.

With regard to energy contracts with dynamic prices, developments on the wholesale markets are reflected in consumer rates the next day already. That is because, with dynamic contracts, consumers pay the price on the day-ahead market plus a purchasing fee. ACM’s monitors reveal that the number of customers with dynamic contracts has risen in the past month. At the moment, six percent of all Dutch households have dynamic contracts, which amounts to 423,000 households.

Oversight over prices

ACM conducts oversight over the reasonableness of prices. In its Monitor on the consumer energy market, ACM sees that certain prices for variable contracts lie far above the other prices. ACM will conduct a further assessment to determine whether these prices are reasonable.

Filling rate of gas storages dropped

ACM’s energy monitors also reveal that, in the past month, the amount of natural gas in the gas storages further dropped to 38 percent of the capacity on January 31. As such, the European Union’s minimum filling rate of 39 percent has not been met. European rules stipulate that the Dutch Ministry of Climate Policy and Green Growth (KGG) must take measures if the filling rate is more than five percentage points below the mandatory threshold. For the current heating period, the storages still have sufficient natural gas, but, after this winter period, those storages need to be refilled substantially. Since the gas price in Europe is currently higher than in other parts of the world, it is advantageous for businesses to ship liquefied natural gas (LNG) to Europe.

ACM will continue to keep a close watch on the developments on the wholesale markets and consumer markets, and will see to it that businesses comply with the rules so that prices on the free energy market are formed in a fair and transparent manner.

• Monitor on the consumer energy market (in Dutch) (external website)