Energy update from YPO

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March 2022 Energy update from YPO. This is important if you purchase your schools energy via the YPO contract, in relation to the current energy crisis and future energy costs.

Current Market Situation

Over the last 8 months or so, the energy markets have been going through unprecedented times with prices on both gas and electricity wholesale markets reaching record highs. Initially prices were driven by the low gas storage situation across Europe entering the winter heating season, however as we went through winter the storage situation improved and return into the 5 year average range.  Liquid Natural Gas (LNG) cargo arrivals to UK and Europe were at record numbers and with no cold snap forecasted in long range weather models it was looking like some form of normality would return to the markets.

However, The escalating conflict between Russia and Ukraine, then became the main driver for energy prices as Europe relies on Russia for around 40% of its gas needs, with a proportion of this gas coming through Ukraine. The invasion of Ukraine by Russia at the end of February which shocked the world pushed prices again to record highs. The markets are experiencing extreme volatility at present with 20-30% swings becoming very common. The gas market peaked at 800 p/therm on Monday 7th March, which equates to 27.30 p/Kwh just on the wholesale element alone, which is a ridiculous price level. Prices have fallen back since then, however still remain very high compared to recent years.   

YPO provides regular forecasting updates, which is based on information available at the time of producing that forecast. There is no doubt that the volatility within the markets at present has made forecasting very challenging and changes on a regular basis. Liquidity has also been an issue in the electricity markets, with prices not always being available.

Please feel free to share this summary with other customers that use your contract (E.G. schools)


Alternative purchasing Strategy

As discussed last week, what I am proposing is the option to leave some volume open to trade within period, the split will be 70% purchased in advance (by the end of march) and 30% left to trade within period as this is the most sensible volume split given the current situation. It will follow the below process:

  • A reference wholesale price will be set end of March/beginning of April. This will be based on what has currently been bought and the open volume at current market prices.
  • During the period April 22- September 22, the remaining 30% of volume will be bought for the supply period 1st April 22-31stMarch 23, this will be a combination of buying Monthly, Quarterly and Seasonal contracts. There will be no day ahead trading due to the high risk associated with electricity spot markets.
  • A reconciliation will take place after 6 months and will appear as an additional line on your October/November invoice. If the market falls and is lower than the reference price, this will be a credit. If the market moves higher than the reference price then this will be a debit.
  • No further reconciliations on the wholesale price will take place after this.


This approach will give more time for the market to settle down, given the current Ukraine/Russia situation. Obviously, there is no guarantee that prices will fall using this approach and the strategy will come with risks, due to things escalating at any time. If there is any disruption to gas flows from Russia to Europe, prices will go significantly higher within period.

We are currently just over 50% purchased for the period 1st April 2022-31st March 2023 for electricity and I have done some modelling below based on wholesale price increases and decreases, as to what this does to the overall budget figure in regards to invoiced % increases:


Please note that the figures below are based on yesterdays (14/03/22) market close prices:


Wholesale Market Movement

Budget Forecast from 1st April 22 (Increase)












































To summarise the above table, if wholesale prices were to increase by 60% on yesterdays close prices, this would mean the forecast increase from 1st April 2022 for you invoice rates (Commodity and non-commodity) compared to your current rates would increase by 168%. If the market was to fall by 20%, the forecasted increase compared to current rates would be 92% increase.

Timeline and process

The options are as follows:

  1. Stick with the current strategy of purchasing 100% of Electricity Volume by the end of March.
  2. Pursue an alternative strategy of purchasing 70% of Electricity Volumes by the end of March and the remaining 30% purchased by end of September 2022.

We will know what the strategy is by close of play on Friday 18th March  and will send a further update at this point, in the meantime, YPO will continue to purchase when liquidity is there and at the opportune moments


Published: 17/03/2022
Audience: Headteachers, Business Managers, finance managers
Contact: Michael Saunders Greenaway

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