The new Market Trigger Strategy combines with broker’s 365-day market monitoring to deliver optimum packages, writes energyTEAM’s head of procurement Paul Garratt.
Energy management consultancy energyTEAM is challenging the traditional thinking that presents businesses with only a stark choice between take-it-or-leave-it fixed rates and higher-risk purchasing on wholesale markets. Each of these approaches has its benefits: the budget certainty of fixing prices at inception versus the possibility of big savings by following the market. However, each also has a downside: if your broker leaves it until the last minute to approach the market, you might fix at an unfavourable rate; and predicting open market movements is never going to be an exact science.
energyTEAM has recently introduced an innovative strategy for larger users, typically those using in excess of 0.5GWh per annum, whereby energy procurement managers can now have their cake and eat it. Under the new Market Trigger Strategy, firms are able to benefit from budget certainty for each 12-month period of their contract while gaining access to the flexibility of the wholesale markets.
Clients will make an initial purchase of an agreed proportion of their annual energy. The balance is then acquired on the wholesale markets, using defined market trigger points, over the period of time prior to contract commencement.
energyTEAM procurement specialists work closely with clients to define the trigger points at which quotes will automatically be obtained, ultimately limiting the risk of losing out on the best deals or unplanned overspending. These price boundaries are monitored and kept under review in line with overall market trends to ensure that they remain appropriate to market movements as well as changing client requirements.
The split between energy bought at a fixed price and that acquired on the wholesale markets during the course of the contract is bespoke to each customer, depending on their commercial and operational needs. It also takes into account the non-energy elements of their costs (network charges etc).
Whichever of our strategic approaches a business chooses, the bottom line is that it is never too early to plan ahead. You should be thinking about your next contract before the ink is dry on your current one, so that your advisers have time to build up an accurate picture of your business and requirements, and can help you to choose the best strategic approach. The last thing you can afford in this market is to be forced into a last-minute decision.