Electric costs?

[Buckman]

But its todays income that has to purchase tomorrows power.

And that is where the problem lies as it is expected that the cost of power will drop within the next 12 months so if they buy at today's price, in a years time when prices have dropped they are selling at the price they paid today which will be way above what it should be. If they sell at a lower price, they are making a loss and end up going into administration and closing up shop.

However more than likely they will anticipate that there may be a drop in 12 months and conseuqently pay a lower price and not at today's price. It is very complicated and a fine balancing act.

 

[otherclive]

And that is where the problem lies as it is expected that the cost of power will drop within the next 12 months so if they buy at today's price, in a years time when prices have dropped they are selling at the price they paid today which will be way above what it should be. If they sell at a lower price, they are making a loss and end up going into administration and closing up shop.

However more than likely they will anticipate that there may be a drop in 12 months and conseuqently pay a lower price and not at today's price. It is very complicated and a fine balancing act.

They are used to doing it just like airlines hedge fuel, and companies hedge currency too.

 

[Buckman]

They are used to doing it just like airlines hedge fuel, and companies hedge currency too.

In normal times it is not generally much of a problem. At the moment no one really knows what is going to happen tomorrow, next week, next month or next year. Maybe electric will be the least of our worries?