Energy Procurement for Large UK Businesses
Energy procurement involves securing the most economical supply arrangements possible. As the market has evolved, Utility Saving Expert has pushed forward to proactively identify new opportunities to help our customers get the best business energy deals. We’re here to help you cut costs on your gas and electricity bills. To get started and see how much you could save, use our free online comparison tools.
What is energy procurement?
Energy procurement is a process which takes into account the price, sustainability, current and future business needs to identify the best energy solution for your business. The best solution will be aligned with your company’s requirements. Procuring energy helps you cut costs without having to compromise on the amount of power your business needs.
Types of energy procurement
Fixed energy procurement
A fixed energy procurement option will give your business confidence during the contract duration. This enables you to forecast your needs accurately, allowing you to better control your expenditure. The fixed energy contract, as the name suggests, can be fixed for up to 5 years. Before it is due to expire, you will be able to review it 12 months in advance. This allows you to budget more effectively during the contractual agreement.
The energy market can be volatile as unit rates can change on a daily basis. A fixed energy contract will help you avoid being exposed to this volatility by giving you stability.
Advantages of fixed energy procurement
- Regular fixed payments make budget forecasting simpler compared to alternative energy procurement methods
- No rising future commodity and non-commodity costs
- Suppliers will be absorbing the long-term risk to price fluctuations
- Not as complex in comparison to alternative types of energy procurement
Disadvantages of fixed energy procurement
- Suppliers will likely increase costs to try and mitigate long-term risk
- You will not be able to take advantage of any price reductions during the contract period
Passthrough energy procurement
Non-commodity charges are passed through at the current market rate, whereas wholesale charges will be fixed. Passthrough contracts could in fact reduce your business energy bills.
Passthrough energy procurement is better suited to businesses that do not have a fixed budget and are not averse to some level of risk. A passthrough contract may be the right solution for any business manager/owner who wants to be more involved in the procurement process.
However, it’s important to make mention that energy usage during peak periods can be very expensive. This is where Utility Saving Expert can help your business better understand how it’s using electricity and gas.
Advantages of passthrough energy procurement
- You will benefit if business electricity prices fall
- You will normally be offered a lower price compared to fixed energy procurement as you will be taking on some level of risk with market fluctuations
- If wholesale market prices decrease in the future, you will be able to take advantage
- Passthrough energy procurement is great for customers who can manage usage patterns to avoid expensive triad charges
https://www.utilitysavingexpert.com/energy/business/electricity/
Disadvantages of passthrough energy procurement
- If you’re on a fixed budget, the uncertainty can be a real challenge
- Third-party costs can and will fluctuate
- More complex to manage in comparison to fixed energy procurement
- Initial cost estimates are not a guarantee of future costs
Flexible energy procurement
Often times, a fixed price contract may seem restrictive for a number of business energy users. This is where a flexible procurement contract can be the ideal option for the right user. Customers will be able to benefit from a constantly changing energy market by spreading the risks associated with flexible energy procurement.
By selecting the flexible procurement option through Utility Saving Expert, our procurement specialists will be able to manage the negotiation process for you.
Advantages of flexible energy procurement
- You can take advantage of fluctuating market prices
- Allows you to spread the risk over multiple purchase points
- Provides business customers with complete control over their energy purchasing
Disadvantages of flexible energy procurement
- Flexible procurement is a far more involved process compared to other procurement methods. You will need to make complex purchasing decisions, which requires an extensive knowledge of the wider energy market
- This option requires larger tradable volumes in order to access the wholesale market
- You may be exposed to some risk if not managed in the correct way
Public energy procurement
Public procurement is the process agencies and governmental departments purchase products and services from the private sector. In this context we are focusing on purchasing energy.
To conclude, there are a number of different ways to procure energy, as we have explained above. Each process has its own advantages and disadvantages that must be taken into consideration before making a decision on the best option for your business needs. Your choice will determine how much you’re able to save on gas and electricity. However, making the wrong choice could be very costly during the contract period.