Flexible Energy Baskets

Our energy basket arrangements allow our customer to combine their energy requirements with other similar sized companies and pull together a total combined energy spend. This can either be on a traditional fixed price basis or on one of our flexible basket arrangements. 

We have a number of basket purchases covering various dates throughout the year so we are always able to combine energy spend with other existing purchase groups that we already manage. 

Review our Business Electricity Brochure and an overview of our approach and methodology process. 

This can be a combination of single sites or a group of sites, and this type of solution provides access to a more transparent product choice and access to wholesale energy trading solutions that are risk managed for your personal business requirements.

Plans allow for both gas and electricity, and contracts can be combined to provide a single neutral end date called a co-terminus contract.  Sites can be added or removed from the overall account and initial energy usage patterns are assessed along with the right risk management purchasing strategy for your business needs.  From this information a decision is made to purchase directly from the wholesale market on a ‘flexible’ supply contract.

The Advantages of Flexible Procurement

Do you have the most suitable energy contract for your organisation?

The Potential Drawbacks of Fixed Procurement

Historically, fixed energy procurement is the more traditional approach to energy purchasing. The main advantage is that the energy price is fixed for the contract term, providing budget certainty.

Despite providing a more cautious approach to energy purchasing, fixed procurement can have some disadvantages:

1.    Timing - If you lock into your next fixed energy contract on a single market day, you lose the opportunity to gain access to improved wholesale pricing further down the line.   

2.    Risk premiums - Suppliers face risks associated with your supply contract in terms of volume variations, credit risk, and especially non-energy charges, such as transportation charges and green taxes. To cover this risk they add a premium to your prices, which usually increases with the length of your contract. These risk premiums are significantly reduced through a more transparent method of buying energy.

3.    Are all elements fixed? Do not assume that all costs are fixed under a fixed contract. Most suppliers’ standard terms stipulate in their T&Cs that they can ‘pass through’ any increases in non-energy costs, such as transportation charges or green levies, to customers during their contract.In the energy basket, non-energy costs are fixed 100% on an annual basis. They are then reset annually just before the anniversary of the contract meaning that the price you pay on circa 60% of the total energy bill is more reflective of what is should be and contains less premiums.   

Is Buying Flexibly and in a basket an Option for my Organisation?

• Your organisation does not have to be spending millions on energy to be able to access flexible purchasing.
• The volume thresholds have substantially reduced over the last few years.
• Flexible procurement is available to organisations using over 5 million kWh (5 GWh) of energy.
• Organisations using less than or up 5 million kWh can join baskets to combine their consumption with other client groups so the overall consumption is large enough to access the considerable benefits of the flexible approaches, so size is no longer a constraint and the ability to buy in small phases over a period of time is available. Catalyst also invite customers who consume 5-7 million kWh if an aggregated approach is desirable.
• Flexible procurement does not have to be complex; companies can buy ‘with a fixed mentality’ e.g. buying energy once a year but doing so within a flexible framework. This gives the ability to change the buying point if the market increases or decreases, offers slightly lower premiums, access to additional product benefits, and a consultant constantly watching the market, using forecasts and technical analysis.
• Whilst flexible procurement is not for organisations who demand 100% budget certainty, it does allow risk to be capped with parameters in the purchasing strategy to protect budgets and minimize any overrun.

The Benefits of Flexible Procurement

Flexible procurement is an alternative way to purchase energy that allows organisations to take advantage of the ups and downs of the wholesale market. It involves tracking the wholesale market and purchasing smaller chunks of energy throughout the length of a contract. The aim is to buy during price dips and avoid purchasing during price spikes or when adverse market events are shorter term.

• Direct access to the Catalyst energy command desk, and in depth market insight and access to a high volume product for low-volume users.
• No cross subsidy of non-commodity costs - for example, distribution and transmission costs.
• Half-hourly and non-hourly meters under one single contract.
• 36-Month framework, which means that wholesale energy price risk can be effectively managed further ahead and removes the need to tender annually.
• Flexibility for site additions, and removals, with the ability to add sites and harmonise energy contracts.
• Ability to exit the basket arrangement and place a fixed price with the supplier should this approach to buying energy not suit during the term of the contract - win/win.
• Position reports and performance reports at a frequency that suits
• Long-term energy price risk can be swiftly managed.

Wholesale Energy Market Movements Become Advantageous

Flexible buying avoids the main drawback of fixed procurement; it removes the need to buy all your energy on one day, which may subsequently turn out to be uncompetitive.

This allows your organisation to spread the risk of purchasing, from one to multiple purchasing points, dramatically improving the chances of achieving improved energy purchase prices.  

Ultimately, organisations become empowered to avoid buying large volumes at market highs and seek out market lows – aligning their procurement strategy to the movements in the wholesale market and not fighting against them. 

• Unlike a fixed price contract, the price of the commodity element is left to float along with the corresponding volume and a commodity reference price is assumed at this stage.
• The non-commodity is then fixed upfront on an annual basis and the energy supplier will produce billing rates (Reference price + non-commodity).
• The reference price is then adjusted to take into account the difference between what was assumed above and the actual achieved purchase price secured by our traders.
• Gas accounts will not see any adjustments as the gas supplier will invoice at the achieved purchase price and a reference price is not assumed for this utility.
• Further and possible savings are then applied to the invoice.

Risk premiums reduced

Flexible procurement allows you to purchase energy closer to the date of use, reducing the risk premium you pay with fixed contracts. It can be substantially reduced if you have a flexible product which can ‘pass through’ non-energy charges.  

Fixed, transparent ‘pass-through’ charges

In the past a key benefit of fixed contracts was, as the name suggests, the certainty of one fixed price for the contract duration. However, as mentioned above, most fixed contracts allow the non-energy element of the price to be ‘passed through’ to the customer if those elements exceed the supplier’s original expectations, so customers often see increases in their energy ‘tariffs’ during their contracts.  With a flexible procurement contract, these non-energy charges can be fixed or passed through at their published rate, and clearly itemised on bills. This not only allows clearer visibility of what is being charged, but also allows you to compare each supplier’s non- energy costs when it comes to contract renegotiation time.  

A long-term energy strategy

When setting up a flexible procurement framework, a 2-3 year energy strategy will often be devised. This will take a long-term view of the energy market and allow your organisation to do the same, assisting with long-term energy budgeting and forecasting.

Your energy strategy will also consider your organisation’s objectives, such as budget or cost savings, and all purchasing decisions can then be made based on this plan. Unlike traditional fixed price decisions where you are buying to a calendar date of renewal, you can instead take a strategic view of your purchasing decisions.