Until the end of 2020, a significant proportion of Suomen Kaasuenergia and Auris Energiaratkaisut customers have purchased gas or heating energy at prices based on the K-energy index (Kei-index). This price index is based on global oil (Brent) and coal (API2) prices, as well as the domestic D35 index maintained by Statistics Finland.
However, the only company supplying Suomen Kaasuenergia with gas at Kei -based prices (Gasum) has decided to stop selling gas using Kei-based pricing at the start of 2021. We will therefore replace the Kei-index with Suomen Kaasuenergia’s own SK index.
Customers do not need to take any action.
The SK index is unaffected by coal and oil prices or the D35 index
The SK index is based on forward prices at the Dutch TTF gas trading hub, which we fix during the three months preceding the gas delivery month. Fixing prices this way makes the index considerably more stable than pricing based on a single TTF front-month price.
We particularly recommend pricing linked directly to one-month TTF forward prices for industrial and process users whose gas consumption remains reasonably steady throughout the year. This allows them to benefit most from potentially very low summer market prices.
SK index pricing, by contrast, is more stable and suits users who value greater predictability and stability in procurement. Its price is formed from TTF forward prices during the three months preceding delivery. The SK index is particularly suitable for heating, where monthly pricing during a cold winter can result in high gas prices at a time of high consumption.
The way the SK index price is formed brings stability to pricing. We fix the SK index price level as follows:
- We fix 15–25% of the estimated gas volume sold using the SK index three months before the delivery month,
- 25–35% two months before delivery, and
- 25–35% one month before delivery.
- We leave the remaining approximately 5–35% of the estimated sales volume unfixed. For the index calculation, we price this portion using the TTF futures price for the relevant month.
The SK index value is announced one month before it takes effect
In addition to stability, another benefit of the SK index is that we announce its value to customers one month before it takes effect.
Based on next year’s monthly futures prices, the gas price forecast using the TTF gas market and SK index is currently (24 November 2020) slightly below the forecast prices based on the Kei-index, which will cease to be used at the end of this year.
If you would like further information about gas pricing or a gas supply quotation, please contact our sales team.