How do you organize your energy contracting?
Every company (and every household) needs an energy contract. Therefore, energy suppliers are offer-producing machines. This means that in a request-for-quotes you need the right approach to get the best out of the suppliers’ arsenal of contractual options. When offers come in, they can be worded quite differently. Are you sure you’re interpreting all of the elements correctly?
- Price, or rather, add-on cost,
- Impact on total cost of how non-commodity cost is settled,
- Whether the contract type fits your needs,
- The quality of the price management services that are offered,
- The volume conditions and whether they constitute a price risk,
- Payment conditions and bank guarantees,
- Complementary services such as online portals, details of meter readings, energy efficiency services, etc.
As markets mature, energy contract types move from one-shot fix price contracts to contracts with fixed percentages of the expected annual volumes (load-following). The next step is contracts with spot indexation and price fixations through buying and selling of capacity blocks. In many markets, such contracts mean that you get an excellent service for a very low price. In some cases, you might decide to opt for a simple spot contract for your physical supply and execute energy trading yourself or through the services of a third party.
In any case, there is an energy contract proposal out there that is best suited to your needs. Beware that all that glitters is not gold. That offer that comes with the lowest add-on cost on top of the wholesale value may not look as good upon closer inspection. Are you sure that it doesn’t come with hidden costs due to restrictive volume or payment conditions? On top of this, some contracts will fit your energy pricing needs and risk management needs better than others. What do you expect from your energy supplier?