Flexible, rather than fixed price, electricity contracts give businesses the opportunity to cut costs. However, without the right resources and knowledge, the complexities involved can expose your organisation to higher levels of risk.
The key to finding the right balance is to understand the process fully – or find an energy partner to help keep you as informed as possible.
While a fully-fixed and inclusive energy contract gives certainty to a business, there’s an associated premium. A flexible contract allows a business to decide how and when to buy electricity, reducing their vulnerability to price-peaks.
For example, a company can segment its purchasing into chunks (tranches). This allows the business to take advantage of favourable market prices by purchasing energy at different future intervals, such as day-ahead, months, quarters or seasons.
What’s the best approach?
By working in partnership with a supplier that has the right expertise and ability to trade, you can simplify your energy purchasing and gain support on developing a robust risk management strategy. To ensure you get the most from your chosen partner, it’s important to discuss the following:
- Who has the authority to buy energy in your organisation? Is it an individual or group decision? Can this person or team react quickly enough?
- When can you buy energy? Do you keep an eye on the market or do you make your purchases more habitually? Could your approach improve?
- How flexible is your electricity supply contract? Are you happy with it?
- What is the highest price you’re prepared to pay for your wholesale energy? What’s the lowest price you’d accept when selling your own power?
Risk management with Haven Power
At Haven Power, we like to understand each customer’s business strategy and energy goals, and gain insights into the level of budget available, flexibility required and attitude to risk.
As part of this, we can help establish the customer’s purchasing processes and forecasting methods, determine the best implementation approach and set the performance criteria for the strategy.
What’s more, our in-house Trading Desk helps customers set price alerts, track the market and perform transactions. We regularly report on agreed key performance indicators, and hold quarterly face-to-face reviews with every risk management customer. We also send customers an annual Board Report summarising how activities throughout the year have mitigated their risk and contributed to their success.
To discuss your organisation’s risk management requirements, please get in touch with Haven Power quoting reference HP256.
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