Auditel Consultant:
Chris Gordon

How to buy Energy Professionally?

07 May 2009 | Filed under: Energy

A really complex area potentially so I’m going to cover off the general principles:

Firstly let’s make the assumption that you are generally better off entering some form of fixed term contract. This would be a big assumption in other markets but in the world of energy for most businesses being on a floating tariff means you are at the whim of the marketplace and usually you will be on less than preferential terms. Exceptions to this may be when you are about to vacate or start up in new premises or if you had very good reason to think that the market price was going to drop dramatically in the very near future (you know more than me in this case!)

A fixed term contract can take various forms but in the main we are talking about fixing prices for a 1,2 or 3 year time horizon. Longer term contracts can be offered occasionally but it would be a gamble taking one given the volatility of energy pricing and you can opt for contracts of less than 1 year (this may be useful if you had multi-sites and you wanted to align all sites on the same contractual time frame).

The key to good buying is doing everything in plenty of time:

- Terminate your current contract in the correct manner and in the correct time window (this varies massively from supplier to supplier and you might need the help of your energy consultant here)

- Tender the business to as many alternative suppliers as possible with as much information as possible – everything from 12 months of half-hour data, voltage type, available capacity, supply numbers and these days full disclosure on your company details for credit checking

-Create comprehensive spreadsheets to take account of every different aspect of cost. Suppliers will deliberately split their costs into often unfathomable categories (Settlement charges, Duos, Data Aggregation) and worse than that will omit charges that they simply “pass through”. You need to compare apples with apples

- Ensure all bills with your current supplier are paid in a timely fashion and check on a regular basis that your current supplier hasn’t objected to transfer of supply

- Check your new bills with a fine-toothed comb. Utility suppliers have a justified reputation for making the most mistakes in billing and you must check you are paying what you thought you were contracted to.

You could also look to buy on the wholesale market if you’re buying very large chunks of energy – another form of fixe term contract where you form part of a portfolio of customers and where prices can be locked and un-locked over time to help smooth the risk curve. This is complicated and so definitely contact me if you want to know more about this.