Grégoire Dallemand was invited to the program C’est pas tous les jours on Sunday on RTL TVI. The boss of Luminus, the n°2 supplier in Belgium for gas and electricity behind Engie. Our journalist Christophe Deborsu questioned him above all on energy prices and the types of contracts possible for consumers. “If we look from January to today, the prices of 2023 have rather increased. On the other hand, if we look at the prices of 2023 compared to 2022, and the prices of 2024 compared to 2022, we see rather a drop“, replied Grégoire Dallemand in particular.
Christophe Deborsu: How will gas and electricity prices evolve? In one year, electricity has doubled, gas has tripled. Are prices still likely to rise?
Gregory Dallemand: For the future, it is difficult to answer you. What I can tell you is how they have evolved until today, but for the future, I don’t have a crystal ball.
Christophe Deborsu: You tell us that you don’t have a crystal ball, but you still have a small one. Because we talk about prices well in advance in your sector. You buy up to three years in advance. What do we see in these three years ahead? Are we rather going up, down? Do we stay stable?
Gregory Dallemand: What we can observe every day is not only the prices of the next day, but we also know the prices of next year and the year after. If we look from January to today, the prices of 2023 have rather increased. On the other hand, if we look at the prices of 2023 compared to 2022, and the prices of 2024 compared to 2022, we see rather a drop. What the prices tell us today is that the fourth quarter of 2021 and the first quarter of 2022 were particularly high if we compare these prices to the prices we know today for 2023 and 2024, which are lower than what we observed in the last quarter of 2021 and first quarter of 2022.
Christophe Deborsu: Lower to what level, to be really concrete? We are heading towards a decline, it is rather optimistic what you are telling us here.
Gregory Dallemand: I obviously hope that the reality of the market prices that we will observe when we are in 2023 will correspond to what we see in future prices today. And I hope even more that today we observe 2024 future prices that are half of what we observe in 2022.
Christophe Deborsu: This is the first time I’ve heard that, good news!
Gregory Dallemand: Of course, I hope that we will actually see a drop in these prices. What I can’t tell you is what the price of 2024 will be in a week. Well, I don’t have the opportunity to answer you.
Christophe Deborsu: That’s why it’s very difficult to predict. If the war in Ukraine escalates, if there are embargoes all over the place… All that can quickly change.
Gregory Dallemand: Absolutely.
Christophe Deborsu: But obviously, you are telling us that in 2022 we are not heading towards a drop in prices. There are people who are going to have problems.
Gregory Dallemand: First of all, I would like to tell you that I understand the situation of consumers who are concerned about high energy prices.
Christophe Deborsu: Can you do something at your level?
Gregory Dallemand: As a supplier, the difficulty is that we have also suffered from this increase in energy prices. It’s difficult for consumers, but I would say that suppliers, and Luminus in particular, have suffered a lot from this increase.
Christophe Deborsu: You are going to explain to us why in order to fully understand. Not least because you have fixed contracts that you had to keep honoring as prices rose. You were not covered for all of your fixed contracts. This is why some companies are in difficulty. This is not your case, but you do not roll on gold as much as one would think. In any case, you are the one who says it.
Gregory Dallemand: It is not the case at all.
Christophe Deborsu: Why?
Gregory Dallemand: The sudden increase in electricity and gas prices that we observed in the fourth quarter of 2021, we were not able to pass on all that consists of as a cost increase to Luminus. We have not passed it on to our clients’ contracts. As a result, supplier margins in Belgium, which were already very low in Europe’s most competitive market, came under even more pressure. So much pressure that some suppliers went bankrupt in Belgium, as in other European countries.
Audrey Leunens relays live the questions asked by Internet users on social networks: People are wondering, how can you make price assessments for 2023 and 2024 already today?
Gregory Dallemand: Eventually, the bill increases for the end customer, but this reflects the increase in prices in the wholesale markets. We, as a supplier, can buy on wholesale futures markets. That is to say, we can buy and sell electricity for 2023. If a customer signs a fixed contract with us, well, we will set a price for 2023 and 2024, and we will at the same time buy energy on the wholesale markets, the price of which is set today for the next two years.
Christophe Deborsu: So, should you take a fixed or variable contract? We know that the majority of Belgians had a fixed contract, but there are fewer on the market. Can we still find landlines elsewhere?
Gregory Dallemand: We surveyed our consumers. 75% of our customers told us that they preferred to extend their fixed contract with a fixed contract. So that creates some predictability of their pricing condition, and that’s their preference.
Christophe Deborsu: So you could finally ensure that the rates are a little lower than today? Anticipating the fact that in 2024 electricity will be a little cheaper? So fixed contracts might not be as expensive as they are now?
Gregory Dallemand: Luminus has chosen to continue to offer fixed contracts today, but it is true that the majority of suppliers no longer offer them today because the legislation in Belgium is a little bit special. I believe it is the only country in Europe where it is expected that a contract is fixed for the supplier. That is, if we offer a price for the next two years, the supplier must stick to it. On the other hand, the customer can change supplier whenever he wants.