Survey shows that German utilities partly support regulatory measures
(Berlin, July 23, 2008) TEAM CONSULT, a Berlin based top management consultancy for the energy business, has conducted a survey among German large and medium distribution utilities. The survey focused on issues of gas procurement and sales and produced some surprising results.
The participating utilities have a combined gas sendout representing more than 12 % of the German gas distribution market. More than three quarters of the questionnaires were answered by the management or those responsible for gas procurement. This ensures a high quality of the survey results.
Bad news for the established wholesalers:
Local utilities clearly welcome the simplified rules of the Bundesnetzagentur for network access and daily balancing. Competition between wholesalers is now viewed as normal. The majority of the utilities have no inhibitions giving up partly or completely their traditional suppliers – provided the new conditions are acceptable.
Not surprisingly, the most important issues are price levels and pricing system as well as security of supply and off-take flexibility.
This is credible because most of the participating companies still have either full-supply-contracts or a structured procurement in combination with flexible contracts. A portfolio management solely based on standardised or Take-or-Pay products is not manageable for every company.
Respondents apparently are confident that gas supplies are secure on a long-term basis but are having doubts as far as long-term, market adaptable and reflective conditions are concerned: Within the past two years many companies have reduced the duration of the supply contracts to between one and two years. Meanwhile short-term contracts clearly got the upper hand.
Gas storages and the availability of storage capacities enjoy a high level of interest because of the new opportunities on the liberalized market.
Overall the survey shows that most participants are willing to make use of the new opportunities on the procurement market and welcome the two-contract-model as well as daily balancing.
The procurement market and the market players involved are facing an accelerated mental and physical change.
Optimism concerning the own sales:
On the other hand, assessing the utilities` own sales and its further development produced astonishing results.
Only two thirds of the companies expect a future decrease of market volumes because of CO2 emission mitigation measures and just under one third expects a decrease of market volumes by 2 % or more.
TEAM CONSULT is of the opinion that this evaluation is much too optimistic. Based on this finding it can only be recommended to intensively review this issue to get accommodated with new regulatory measures on energy conservation and sustainability.
Rather optimistic too is the evaluation of the competition for end customers:
- More than 50 % of the companies believe that they will loose less than 5 % of their residential customers
- Looking at commercial customers the views are not that optimistic anymore. Nearly 50 % are of the opinion that a loss of about 20 % is possible.
What happens when in times of high prices their own customers will be as price-sensitive and act maturely on the market as the utilities do on their respective procurement market?
The utilities` behavior and strategies reveal that the new conditions and opportunities are accepted and even welcomed. Advantages for the procurement of gas are expected. The pre-condition for this is that the instruments and relevant processes fit in with their business models.
The risks on the sales markets appear to be underestimated.
It is further suggested that the gas utility sector should consider more the impact of the energy and climate plans (IEKP) of the Federal Government on the market.
FILLING LEVELS NATURAL GAS STORAGES in Germany - as of September 2nd 2010
During August some 2 bcm of natural gas were injected into German storages resulting in a filling level of around 93% of the total WGV reported. This is good news. Filling levels of individual storages ...
GERMAN BORDER PRICE FORECAST (GBP) for Natural Gas as of August 17th 2010
TEAM CONSULT’s Forecast for GBP of Natural Gas TEAM CONSULT has developed a price formula based on historical data to forecast the German Border Price (GBP). The predicted prices for three months ...
COLLOQUIUM XIII 2010
During the last two years the basic conditions and expectations regarding gas supply and demand have changed substantially. Not only the financial crisis but also fundamental changes, especially in the ...
TEAM CONSULT
Robert-Koch-Platz 4
D-10115 Berlin
T: +49.30.400 556-0
F: +49.30.400 556-99