Been invited to a presentation on flexible energy contracts?
It is one thing being able to explain what a flexible energy contract is but do the people who will be managing arrangements for you really know and understand how to make best use of such a product to take full advantage of what they can bring to your business?
Here are some simple questions to ask…
1. What makes risk management right for my business?
2. How do you know when the supplier offers a price for a hedge that it is reflective of current market prices?
3. If you choose cash-out, what is the best strategy to manage shape fees?
4. Having just one person managing your flexible energy contract is a huge risk - what support do they have to cover holiday/sick? Not having cover could lead to missed opportunities and a lack of expert continuity.
5. The landscape of energy management is complex and dynamic. Question them on their background, knowledge, and experience. Check their track record in terms of performance and question whether they have the breadth of expertise across the team to reassure you that your portfolio is in safe hands?
6. What is your platform for position reporting and communication of executed trades in order to help me report and track my position?
7. Effective communication between you and the people managing your flexible energy contract is essential for you to make informed decisions about your energy contracts. They should address your questions and discuss your concerns with transparency, in turn providing you with a better overall understanding of the energy market.
For more complex questions, you could ask:
1. How do you sell or unwind existing hedge positions in order to maximise the benefit of the product?
2. How many group purchasing baskets do you have under management, and what strategies do you deploy on each?
3. What is your commission structure for delivering risk management, on a cost per kWh basis?
4. What is best, volume tolerance or cash-out? Why?
5. What is best value – forward hedging or day ahead?
6. What is your definition of risk management?
7. What controls do you have in place to prevent rogue trading?
8. What controls do you have in place to mitigate market gapping?
9. What are the technical parameters of your trigger points?
10. How do you identify resistance and support levels and how do you differentiate between the two?
11. How far out is the most you should hedge?
If you would like our answers to each of these questions, feel free to get in touch and arrange a discussion with one of our Risk Managers Nick.Heng@cec.uk.com or Mike.Stafford@cec.uk.com
