Steps to manage electricity contract costs, achieve savings and minimise the risks associated with fluctuating prices

11 Dec 2012Archived News David West Climate Change Matters

With the increasing impact of energy on your bottom line, Energetics' outlines the steps that should be taken in order to maximise the benefits and minimise the risks when going to market for a new electricity contract. 

Whilst the checklist below doesn’t cover all aspects that we consider, the most important elements are outlined:

  • Time your approach to the market and act when prices are low or down- trending.
  • Monitor market prices and don’t rely on the market being attractive one month before your existing agreement expires - go to market between 6 and 12 months in advance of contract expiry
  • Be prepared to go to market at short notice should good market conditions arise and streamline the approvals process to minimise the time taken to scrutinise retailer offers.
  • Accurately forecast and tailor load variation requirements to likely growth scenarios.
  • Ensure your contract allows sites’ ‘roll-in’ and ‘roll-out’ provisions that cater to your needs
  • Use a transparent methodology for assessing whether pricing is good.
  • Use a transparent methodology for assessing optimal contract duration.
  • Always incorporate environmental charges when assessing contract pricing as these may vary overall costs by more than the offered electricity rates.
  • Ensure your carbon clause deals effectively with legislation from both sides of government ie carbon pricing in, carbon pricing out or carbon pricing reduced.
  • Investigate your business’ ability to curtail and/or shift electricity usage and test the incentives offered by network operators to reward short notice availability.
  • Negotiate any preferred services in advance of executing the contract with the retailer but do not accept any unnecessary elements in your tender/contract, as you will usually pay for them!
  • Determine if there are opportunities to take advantage of buying groups for small sites?
  • Finally, ensure a post contract review is completed so that you are getting what you are paying for!  A review should include:
    • Bill checking
    • Do billed rates match contract rates?
    • Are network costs passed through correctly?
    • Load variance.  Are sites within the permitted usage variance?
    • Is the supplier delivering everything they committed to?  Reports, notifications and agreed preferred services.

Energetics has experts in all of our offices who understand energy markets and can assist in all or part of these activities.
 

 

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