The electricity market moves quickly, and when pricing trends downwards, it pays to act fast.
Recent ASX Energy reporting shows pricing for future years sitting at comparatively lower levels than seen in previous years for all states throughout the National Electricity Market (NEM).
These market conditions offer an ideal window of opportunity for businesses ready to forward contract – here’s how it works.
What is forward contracting?
Forward contracting is when a business secures a future electricity price at a predetermined rate for a set period. That price is influenced by conditions in the ASX electricity futures market at the time you contract.
An effective way to forward contract is to lock in a rate when prices are low, even if your current contract isn’t about to expire. Your locked in rate can apply to a contract that starts in the future.
It’s important to note that this is separate this from the wholesale electricity market, where prices change every 5 minutes and energy is traded in near real time. Forward contracts are used to manage price risk looking ahead.
On a forward contract, your base rate won’t increase if the market spikes during the contracted period, which means your business has a level of protection from market volatility.
The benefits of forward contracting for businesses
- Hedge against price volatility
Forward contracting can help protect your budget from sudden market increases, making forecasting and approvals easier.
- Budget certainty
With a set rate for the contracted period, you can reduce bill volatility and budget with greater confidence.
- Risk mitigation for real-world disruptions
Electricity prices can be impacted by weather, outages, supply constraints and policy changes. Forward contracting can help reduce exposure to those shocks.
- Turn electricity into a strategic advantage
For energy-intensive businesses, a well-timed contract can support competitiveness by stabilising a significant operating cost.
Why consider forward contracting now?
With ASX electricity futures dipping recently, including NSW and QLD at their lowest in 4 years, and SA and VIC at their lowest in about a year, many large energy users are locking in pricing to add certainty to future budgets.
Because energy prices can move quickly and unpredictably, forward contracting can help your business secure a price you’re comfortable with, reduce exposure to volatility, and tailor your approach by site to take advantage of the best regional opportunities.
Talk to an energy specialist
Flow Power has business electricity specialists in your state who are here to help you find the best deal.
Not every retailer passes through forward market movements straight away, but Flow Power updates our available base rates daily so business customers can benefit as prices fall.
If you’re already a Flow Power customer, reach out to your Account Manager. For all other enquiries, get in touch below.
