Rain and snow in Norway and Sweden last winter caused electricity prices to rise to record highs. For Arla Foods this meant a DKK 40 million increase in electricity charges compared to the 2002/03 budget.
To counteract a possible repeat scenario this year, Arla Foods has adopted a new purchasing policy.
Whereas Arla Foods previously purchased electricity on the spot market, Arla Foods Global Purchasing has now switched to fixed prices.
This means that the price of electricity for the winter (October-April) will be decided some months before winter sets in. As for the summer’s consumption, 50% will be at fixed prices while the remaining 50% will be at spot prices.
In practice, small pools of electricity will be purchased on the electricity exchange, Nordpool.
In the longer term, the new policy is expected to bring greater stability to electricity purchasing.
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