Hi, I’m Phil Ager, Managing Director of Control Energy Costs. Today I’m going to talk to you about flexible energy contracts.
I’ll try to keep the explanation as simple as possible.
When opting for a more traditional fixed price energy contract, you are effectively trying to second guess a day when the market looks favourable to secure your requirements for a fixed period.
This can leave you exposed to short term market conditions that will impact on the price you are offered, especially if making a decision is left until the last minute.
Energy is traded as a commodity and futures markets tend to be less affected by current market issues and it follows that the further out you are prepared to look, the greater the opportunity to minimise risk and exposure to volatility.
So, what is a flexible energy contract?
In a nutshell, it’s a purchasing framework agreement agreed with a supplier that allows you to buy energy up to 5 years in advance and build a price made up of multiple purchasing decisions over time rather than making that all important decision on a single day.
Having a purchasing framework in place gives the ability to move quickly when the markets are favourable and spread risk when the markets are high.
Using historical consumption data, we will work with an energy supplier to agree your unique energy shape and tradeable blocks of energy that can be bought over time. Any consumption that falls outside these tradeable blocks – either over or under consumption - will be covered by either a unique shape fee which will vary depending on your business type and the days/hours you operate or a cash out reconciliation.
Your monthly unit rate comes from a weighted average of the individual energy blocks that have been purchased for the month in question, plus the agreed shape fee or reconciliation.
Working in consultation with our procurement specialists, our dynamic energy procurement service is a great way to start looking at flexible energy contracts – wholesale market access as we call it. Our risk managers will work with you to create a strategy and help you capitalise on market fluctuations.
Why not get in touch with us via our website, email or phone.