Water utility UU sees power costs jump despite extensive hedging

Northwest water utility United Utilities saw its power costs rise nearly 20% to £99.6 million in the year to end March 2022, despite a hedging strategy that saw it fix prices well below market rates for the year.
Where UU bought power, either hedged on the open market or through fixed rate power purchase agreements (PPAs) with its renewable energy company United Utilities Renewable Energy Limited (UURE), it paid on average £78/MWh. It also had additional self generation, at zero cost, which brought the average cost across all consumption down to £65/MWh. Nevertheless, electricity costs rose by £16 million to £99.6 million.
The company said locking in the majority of its consumption for 2021/22 meant it achieved prices “significantly lower than the current market rate of over £200 per MWh for next year”. It added “We are also locked-in on over 90% of expected consumption for 2022/3, and around two-thirds of expected consumption across the final two years of AMP7, at rates that compare favourably to the current market rate.”
The company began the ‘active process’ of selling its renewable energy business, UURE, in May 2022, after announcing the planned sale last year. It says that comprises property, plant and equipment with a carrying value of £64.6 million as at 31 March 2022 and they will be sold with the PPAs to UU.

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