Top 5 tips for procuring energy
The supply of energy (electricity and gas) often represents one of the single largest areas of spend for any institution yet is often one of the areas most commonly overlooked or least understood. To help members get greater benefits and outcomes from their energy supply arrangements, we have developed 5 top tips to assist members in the procurement of energy:
Be proactive and plan in advance
The best single piece of energy advice that we can provide, is for members to consider their energy procurement options well in advance of their current energy contract renewal dates.
Energy markets are actually a “futures commodities market”, which means you can purchase a future dated energy supply contract at any point, well in advance of your current contract end date. Proactive members increase their chances of identifying and contracting at a lower and more effective cost point, as there is greater opportunity to track the energy markets to determine the most optimum purchasing arrangement for their requirements.
Furthermore, failing to take proactive steps to manage your current energy supply contract termination, may expose members to unnecessary costly risks such as being subjected to higher “deemed/out of contract” rates.
Be mindful of onerous clauses and terms
When utilising the services of a “broker” to source the energy supplies, members should be especially mindful when presented with “Brokerage Agreements” which will govern the contractual relationship between the broker and the member. Certain brokers will try to enforce a brokerage agreement which will often outlast any individual energy supply contracts placed, this will severely limit the options available to a member when their supply contract expires. Members entering into a brokerage agreement should ensure that it terminates at the point of the energy supply contract expiry.
Another common pitfall to be aware of is that certain “Letter of Authority” templates allow brokers to sign contracts on your behalf without prior notice or consent from you. We would advise members to be wary of both these practices, which are in the interests of brokers, much more than energy end-users.
The CPC Utilities Supplies and Services framework requires no obligation from customers, and all quotations are free and without pressure to proceed. All costs will be presented in a transparent manner, with full supporting explanation, so members can make an informed decision.
Whilst Letters of Authority are a data protection requirement of energy suppliers, as they are needed in order to request quotations your behalf, our LOA template contains the following statements, to protect your interests, as the customer:
“Contracts or binding documentation will continue to require the approval and signature of an authorised representative of the company”
Understand and implement termination notices
Nearly all suppliers have termination notice requirements which should be adhered to, to ensure that you retain freedom of choice at the end of your contract period. There is often a misconception that a termination notice will end your contract early, or prevent you receiving a renewal offer, but this is simply not the case, and a termination notice should always be submitted as good practice to protect your own interests.
The actual energy supply contract often won’t detail termination requirements, and they do vary from supplier to supplier, with some more pervasive than others.
Termination notice requirements, and email addresses for submission, can be found in the corresponding set of terms and conditions accompanying your supply contract. A minimum of 30 days’ notice is usually required, but for some suppliers it can be as much as 90 days, and in extreme cases if termination is not submitted, you may be rolled onto much higher “deemed / out of contract” rates for a full 12 months.
“Brokers” should take responsibility for this, but often they don’t, to likely try and keep customers in one place. Through the CPC Utilities Supplies & Services framework however, we will submit your termination notice in good time, on your behalf, for every contract that we place, and we will also assist you to submit notice to your current suppliers, if you wish, as long as enough time has been left to do so.
Keep up to date and accurate records of energy contract/usage
Often the initial stage of gathering correct and current energy supply and contract information, in order to request quotations and provide full cost analysis, can appear to be the most time consuming.
The CPC Utilities Supplies & Services framework can greatly assist with this, if we have a Letter of Authority and a copy Energy invoice for Gas/Electric supply point, we can obtain the remaining information from your suppliers with the LOA, but it does take a few days for suppliers to provide information.
If up to date records are kept, this will ensure a more streamlined procurement process and quicker return of quotations. This also provides the significant benefits of you having usage figures readily to hand for legislative/environmental reporting, cost figures for budgets, and facilitates easier year on year comparison.
Understanding overly complex contract types
Often many suppliers and brokers, give a fantastic “stock-market trader” type sales pitch, about more complex flexible contracts, however often the full picture isn’t provided to customers. Although these types of contracts provide more than one purchasing point, there is a risk from the majority of your energy usage, being initially left “unlocked” and subject to the volatility of the energy markets. Rates often vary from month to month and invoice to invoice, making determination of actual costs, sometimes impossible, before the contract has ended. Many suppliers and brokers take advantage of this lack of transparency and cost visibility. Also, often no tangible future costs can be provided for the yet unpurchased volumes, aside from a forecast, which is just that. Whilst UPG - Utilities Procurement Group Limited, the supplier on the CPC framework have the technical expertise to provide a full range of contract types and variants, they will try and fully explain the pros, cons, risks and restrictions of each variant transparently. Where a member values known upfront costs, budget certainty, rates that will not alter for the contract duration, and ease of forecasting, our recommendation would undoubtedly be a Fully Fixed contract.
Find out more about CPC’s Utilities Supplies & Services Framework by visiting the framework web page or contacting the dedicated energy helpdesk on 03453 020041.