There is a hole in my basket!
April 1st 2009 So, if you have been told by
your energy broker that
you are a 'SMALL' consumer
(they might say you are small if you
consume less than 50GWh of
electricity) and the best way to
manage your spend was in a basket,
you are probably looking at your
energy price and wondering what
went wrong.
Some horror stories in the market
say that you might even have a
commodity price as high as £70/MWh;
with some disillusioned consumers
going so far as to label the
performance of some of these baskets
or funds (which after all are run by
serious energy consultants purporting
to be experts in their field) a disgrace in
a market which is closer to £40/MWh.
On the upside,apparently they are
promising significant savings this
year; although saving money because
the price last year simply wasn't very
good is something most consumers
we speak to do not aspire to.
Then mend it!
The first problem tends to be the
representations that have been
made about the contractual options
that are available to you.
'You only have 20GWh you can
only do a flexible deal if you join
our basket or fund of customers'
'Your only 8GWh you can only do a
fully fixed price'
These statements are just
materially incorrect. Encore have
been risk managing consumers as
small as 4GWh annual consumption
for over three years, individually to
their own risk management strategy,
individually tailored but more
importantly controlled by the
customers strategy to meet their
own corporate objectives
It is easy to see why your
organisation may have fallen for the
stories that took you down a path
towards unnecessarily high energy
prices,indeed it may well be that your
current energy advisor really hasn't got
the capability to give you your own
flexible energy contract. Alternatively
it could be that by aggregating
volume your energy advisor does not
need to incur the overhead to properly
measure and control your portfolio or
provide transparency and feedback as
to how your position is evolving. More
worringly you will not even have had
the opportunity to influence the
decisions that are being taken on your
behalf under the guise of the needs of
the many and the greater good but
which in reality appear to have failed
energy consumers in general.
In order to procure energy
effectively you need to have a risk
management strategy that exhibits
the following features:
Strong measurement and control
Individually tailored to the needs
of your organisation
Capable of amendment and
change over time based on the
changing needs of your business
without considering the needs of
other businesses
Strong corporate governance and
conformance with accounting
standards and financial services
regulations
Based upon what you have been
told so far, you may be very sceptical
of the world that I am describing
and as such the table above shows
you some examples of the results
being enjoyed by those who have
managed to 'Bin the Basket'and
'Forget about the Fund'.
In the table above under 'Your
Basket Price'we have used for
illustration purposes some of the
rumoured prices of some of the
energy consumer baskets, funds or
consortia that are causing consumers
pain this year. In order to evaluate
your potential lost opportunity,simply
replace the illustration price with your
own price and see how your basket
has delivered for you against a tailored
risk management solution that other
consumers have experienced in
exactly the same market and facing
exactly the same challenges as you
and your current energy advisor have.
When seeing such data, your
immediate reaction is likely to be "it's
impossible". At the time of writing
these results are very real and use
individual risk management contracts.
The truth is out there, in order to
mend the problem you simply have to
go out there and find it.
But how shall I mend it?
Well the first step is to leave your
basket and to challenge the validity of
the representations that are being
made to you by your current energy
advisor. We don't believe any
organisation sets out to deliberately
mislead another, but energy risk
management is a serious undertaking
requiring robust systems, clear
governance, independent control and
professional management; you need
to believe what you can see and are
able to validate and not simply rely
on what you are being told.
It's time to look for a new way, in a
world where the process is
controlled, systematic and tailored
and not emotional, speculative and
generalised. If you would like to
request the opportunity speak to
the consumers that have achieved
the results above please do not
hesitate to contact Encore by one of
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