In a year that was punishing for most businesses and families, one of the few pieces of good news was the drop in electricity prices. 2020 was the cheapest year since the market became comparable (2007). However, low prices alone are not enough for businesses and households to benefit directly; only those who renegotiated their contracts or changed suppliers took advantage of this.
For many, changing electricity suppliers is still a daunting prospect. They fear power cuts, power failures or poor customer service. In reality, given the way the electricity supply system is set up, little else changes other than who issues the bill and collects it.
So how does the system work? Electricity is a commodity traded on the open market (OMIE for next-day prices and OMIP for futures). Its production and distribution is concentrated in a few hands, but its commercialisation is spread across many, who do so in a competitive market. There are 38 suppliers accredited by ERSE (the Energy Services Regulatory Authority, the sector regulator) to operate in Portugal. Although not all of them supply all segments, there are certainly more than 20 to choose from, whether you are a family, a large or small business.
This abundance of competitors means that the prices offered at any given time quickly adjust to market conditions, whether rising or falling.
As we have seen, 2020 was a year of low prices, so those who went to the market were able to benefit.
If you did not update your prices during 2020, I suggest you do so now. Although prices rose during the second half of the year, they remain at historically attractive levels.
For those who already have the good practice of consulting the market every year, the price level remains attractive when compared to recent years. What will happen in the coming months will depend not only on the usual production factors that affect prices (wind, rain, gas, oil, nuclear power plant operations, CO₂ licenses), but above all on the behavior of the economy, the major influencer of energy demand.
How will the economy behave in 2021? This is the big unknown that only a finely tuned crystal ball could reveal. Comedian George Carlin said, "Tonight's weather forecast: dark." This forecast horizon seems quite appropriate for the times we live in. In the absence of magical methods, optimising all costs – including energy costs – is a safe bet.
