Good news: Gas prices are much more transparent than UK electricity prices, which signifies how unclear electricity is. Still they are the only ones we've got. We recommend index pricing for a number of reasons: ease of purchase, lack of buyer remorse and lower overall costs are only three of them. In October gas prices for one year ahead dropped from 85 to 65 pence per therm. Why could that possibly be bad news?
1. 65 pence per therm on an annualised rate is still over 60 per cent up on one year gas prices of around 40 pence from summer 07.
2. Month ahead index for October 07 was 32.07, October 2008 was over 75.89.
3. For the majority of SME users who take fixed prices, anyone who took them this year is now looking at being locked into prices that will out turn at least 40% higher each month than today's spot prices. Energy prices that are fixed have been a self-fulfilling prophecy for doom sayers and inflation hawks or for the naive talked into taking them by mostly unregulated cowboys who know almost as little about energy as their customers.
Things are tough all over. But those who prefer to take things as they come month by month on energy, are in a far better position using index prices than those who really should have bought insurance, not energy. We think that by February the year on year difference for index buyers will be zero or even negative – floating buyers will see a year on year decrease for energy costs instead of sitting on 120% increases.