Current issues related to economy, (responsible) investment, pension and income: every week an APG expert gives a clear answer to the question of the week. This time: Martijn Olthof, equity investor with a specialization in utilities, on why energy rates do not immediately fluctuate with the price of natural gas.
With the sharp drop in the price of natural gas in recent weeks, you would expect to see that drop reflected in the energy rates you pay. Especially since not only the price for short-term supply has dropped, but also that for supply over the next two years. But although the first energy suppliers have already started lowering rates, they are not immediately moving along with a falling - or rising - price of natural gas price. There are several reasons for that.
“These things always take some time,” Olthof says. “When prices rose very sharply last year, a number of energy providers tried to raise rates quickly. However, those suppliers did not fare well, because a price increase should always be announced well in advance. That gives customers the opportunity to switch to another provider.” The fact that suppliers must observe the customer's notice period also causes them to be cautious about reducing their rates quickly. “They then run the risk that, in the event of rising gas prices, they will have to wait for the notice period before they are allowed to raise their rates again.”
Opportunism can also play a role, Olthof explains. “There are companies that take advantage of current inflation by raising their prices beyond their own costs because they know they can get away with it. This is also known as greedflation. Inflation causes people to lose their anchor points about what is a reasonable price. They are therefore more likely to accept price increases because everything is getting more expensive. Perhaps that is why some energy companies think: we will leave the high prices as they are for now.”