Delaying Electricity Price Fixes Can Cost Businesses Hundreds of Thousands of Euros

Businesses are increasingly vulnerable to fluctuating electricity prices, which are now significantly impacted by geopolitical events alongside weather and local production. Waiting to lock in prices, a common strategy hoping for a better deal, can backfire dramatically, according to Mantas Masalskis, head of business solutions at "Elektrum Lietuva".

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Business clients often postpone their decision, hoping to get a more favorable price. However, it is influenced by many different factors, so waiting, especially in this period of uncertainty, can have the opposite effect – when the price rises, the company not only does not save, but pays significantly more for the same amount of electricity.

Masalskis explained that for companies consuming large amounts of electricity, even a small price difference per megawatt-hour can translate into substantial annual cost increases. Calculations show that a firm using 22 GWh annually could face an extra 177,000 euros per year if the price rose by just over 8 Eur/MWh, from about 80 Eur/MWh to over 90 Eur/MWh. For even larger consumers, like one using 53 GWh annually, a similar price jump from 100 Eur/MWh to nearly 109 Eur/MWh could mean an additional 453,000 euros in yearly expenses.

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The higher the electricity consumption, the more expensive delays can be. For example, for a company consuming 20 GWh per year, each 1 Eur/MWh price change means about 20,000 euros in additional annual costs. Therefore, the decision on fixing the price is worth evaluating based on specific calculations.

"The higher the electricity consumption, the more expensive delays can be," Masalskis noted. He highlighted that for a company consuming 20 GWh annually, each 1 Eur/MWh price change incurs about 20,000 euros in additional annual costs. Therefore, he advises businesses to base their decisions on concrete calculations rather than simply waiting.

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Waiting by itself is not a bad decision if the company consciously assumes market risk and has assessed the possible consequences. The problem arises when the decision is simply postponed without assessing how much even a small change in electricity prices can cost.

Fixing electricity prices is presented not as an attempt to find the absolute lowest market rate, but as a crucial risk management strategy. It allows for more accurate cost planning and budgeting, mitigating the impact of market swings. Masalskis stressed that while waiting isn't inherently bad, it becomes problematic when decisions are postponed without understanding the potential financial consequences of even minor price fluctuations. The optimal pricing strategy, fixed, market-based, or hybrid, depends on individual company needs, including consumption patterns, financial plans, and risk tolerance.

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If stability, clear cost price, and the ability to plan cash flows more accurately are important for the company, a fixed price can become a way to reduce uncertainty.