Thanks for the comprehensive response, there are a couple of points that it’s worth going through so that it’s clear that Bulb’s wholesale purchasing is always in the best interest of our members.
Bulb would never have any incentive of purchasing energy at the most expensive price as our tariff would clearly become noncompetitive against other tariffs in the market as the wholesale prices are one of the key differentiates between suppliers.
One reason we purchase 3 months in advance is because we are an energy company that do give our members a lower price when energy prices fall. If we had purchased our members energy 6/12 months in the future, and energy prices fall, then we can’t pass on that saving to our members.
When you purchase energy contracts, you can purchase seasonal contracts Summer (1st April - 30th September) contracts and Winter (1st October- 31st March) contracts prior to those dates or specific monthly energy contracts. When you purchase these contracts, in our case three months in advance, the price for these contracts can still change up until the start of that month.
If you purchase the contracts far in advance, the prices have a significant amount of time to change (up or down) which may mean that your energy company either:
- If the prices look set to fall further- Sell the contracts at a loss and then purchase later when the prices hit an expected low point
- If the prices look fairly stable - Keep the contracts
- If the prices look set to rise - Keep the contracts and be able to offer a more competitive price than our competitors
The skill of purchasing energy is purchasing the contracts at the lowest point however, it’s incredibly difficult to know what direction prices are going to go in the future so it’s based in knowledge of the field/knowledge of the market and how parties purchasing on the market can drive prices up or down on the back of price drivers such as the Forties pipeline etc.
By purchasing 3 months in the future, we allow for energy price reductions to be reflected in Bulb’s members prices and in the case of price increases, we are able to give significant notice to our members if we anticipate a price increase.
When electricity prices hit -1.9 p/kWh, it’s often only for a few half-hourly periods at most during a summer month. You wouldn’t see any impact on your prices if the price of electricity was negative for just a few hours during the summer months. Bulb did pass on a price reduction in April 17 following a fall in energy prices, along with 6 price reductions in the last 2 years.
The US LNG industry is still in its infancy at the moment and a price reduction in the US does not feed into UK prices directly as there are significant costs in liquefying the gas and exporting the gas by tankers. The gas can also take a few weeks to reach the UK from the US and the tankers only consider delivering to the highest bidder, which can change en-route to the original country the gas was being delivered to.
I’ve included a chart to show the historical average electricity prices (blue) to illustrate the fact that Winter electricity prices do not intrinsically increase during that period, if you see during the mild winters of 2015 and 2016, the prices of electricity declined during the Winter, so if you had purchased your energy in advance, you would have missed out of a saving.
I’ve also included a chart to show Bulb’s prices throughout the last couple of years for a comparison to the whole prices.
Our pricing is always transparent and decisions to change prices are made very clear to our members, we’ve only 1 tariff too so everyone will see the same change as each other.