In the Energy Market, Monthly Fixes Are Becoming A Hit

Energy suppliers have gradually reduced prices since the beginning of the year in response to falling wholesale prices of electricity and gas. While annual and multi-year fixes are under the government price cap, some smaller suppliers offer even more significant discounts with a monthly fix option, in which the price for each month is derived from spot prices in the previous month. However, prominent players in the market do not plan to offer a similar product.

Since March of this year, Tedom Energie has been offering a monthly fix, a compromise between the banned offering of spot tariffs to households without interval measurement and longer fixes. Since then, the supplier has closed several thousand new contracts for electricity or gas supply, attracting new customers with favorable prices.

The June price for power is 51% below the government cap at CZK 2,993 per megawatt-hour (MWh). The gas price is 59% below the cap at CZK 1,247 per MWh. Distribution fees must still be added to the final price.

“The price for a given calendar month is calculated as the average wholesale energy prices traded for the following month over the last five trading days of the previous month,” explains Tedom Energie in more detail about its pricing policy.

The monthly fix from Tedom Energie also has the advantage that the contract is concluded indefinitely, with a notice period of only one month, which does not pose too significant a risk to consumers in the event of a sudden sharp rise in commodity prices on the exchange.

“We have 100 customers per day interested in a monthly fix. These are mainly customers whose fix has ended. Still, we are seeing an increasing number of customers who are even willing to get out of their unfavorable fix for a penalty,” said Jakub Odložílek, the company’s CEO.

Other suppliers such as Eneka, Elimon, and bezDodavatele also offer a contract with a monthly fix for an indefinite period with a one-month notice period. According to Operator’s data, these suppliers had around ten thousand customers each as of April this year, compared to almost 15,000 for Tedom Energie. This represents only a fraction of the total share of the Czech market.

Large energy suppliers such as ČEZ, E.ON, Innogy, and Pražská energetika (PRE) are the major players in the market. We, therefore, asked them if they also plan to offer a similar product.

“We are not considering short-term fixes,” said PRE spokesman Karel Hanzelka. The spokesman answered the same for the most significant domestic supplier, ČEZ’s Roman Gazdík.

E.ON spokesman Roman Šperňák also expressed a similar view. “As a stable supplier, we purchase energy in advance and continuously, and thanks to our procurement strategy, we can protect our customers from negative impacts and sudden market fluctuations. Therefore, we do not plan to introduce products with a monthly fix,” said E.ON spokesman Roman Šperňák.

“What is not prohibited is allowed,” says the saying, incredibly when filling a market gap that meets actual customer demand. According to ENA consulting company analyst Jiří Gavor, the monthly fix does not violate the law. Otherwise, the Energy Regulatory Office would have intervened.

“From a business perspective, the principle applies that what is not prohibited is allowed, especially when it comes to filling a gap in the market that meets real customer demand and considers real market developments. From a business ethics perspective, however, it is always necessary to ensure that clients understand the nature of the product and know that monthly prices can decrease and increase,” Gavor said. However, he added that large suppliers do not offer monthly fixes because customers of the largest suppliers are often more conservative consumers, and these price products tied to spot prices are not intended for them. Conversely, smaller dynamic companies focus on active customers who do not mind changing suppliers more frequently.

The government ban on offering spot tariffs to households without interval measurement, so-called “smart” electricity or gas meters, runs concurrently with prices capping until the year’s end. The Ministry of Industry and Trade has already said it is not considering lifting the ban early.