19 May 2016 | Adam Leach
In terms of the utilities markets, 2015 was most certainly a year for the bear rather than the bull.
Having already fallen from the long-lasting highs of above $100 per barrel, the price of Brent Crude continued to decline, dipping from around $60 a year ago to its current level of less than $40. It was a decline that surprised even the most pessimistic brokers, but one that was welcome to FMs across the board.
With its pull-down pressure on natural gas prices, industrial buyers benefited from a 26 per cent fall in heavy oil and 17 per cent in natural gas prices in Q4 2015 compared with the year before, leaving only those who had locked in a fixed-price contract earlier in the year in any state of unrest.
As to the year ahead, although there are always any number of unseen events that could potentially turn the picture on its head, there are a number of signals that prices may well stay depressed, if not drop even further.
As the country has experienced a relatively mild winter, stocks and supplies will be higher than predicted - easing the need for energy exports, while the first influx of American shale gas into Europe will mean that even those needed will come in at a discounted rate.
The outlook may well bode badly for the suppliers, but will be warmly embraced by buyers.
On the contract side, with all energy companies struggling to maintain the margins they've grown accustomed to, the scope and types of services they are offering to retain and attract customers are expanding. From installing free smart meters and carrying out audits and assessments on energy efficiency, the time is ripe for buyers to extract extreme value out of any procurement or contract.
In particular, the installation of smart meters will enable buyers to both ensure that they are only charged for the energy used, but also look to negotiate agreements where consumption can be decreased at times when the supplier is at or near capacity.
And although they are still developing, 'time of use' contract terms - where different rates are charged at different times of day - are expected to become increasingly important as the technology develops.
Furthermore, with the number of energy sources expanding, any contract negotiation should take explicit account of the fuel mix from which the supplies will be drawn if there are carbon-heavy sources that are not deemed acceptable.
All in all, it's a good time to be on the buyers' side of the table.