Education sector.
Article 1. How to manage your energy budget in a volatile market
Managing your energy budget in a volatile market can be a challenging endeavour for any business. As costs have potential to abruptly soar, businesses must adopt effective strategies to control their energy expenditure. In this article, we will explore key methods to manage your energy budget effectively, focusing on different terms of agreements, avoiding rigid frameworks, and agreeing to more flexible products.
Long-Term Contracts: Stability in an Uncertain Market
One of the most effective ways to give budget certainty is to secure long-term contracts. These contracts offer a fixed price for energy over an extended period, typically ranging from one to five years. Here are the benefits:
1. Price Stability: Long-term contracts protect your business from rising costs, providing a predictable energy spend that simplifies budgeting.
2. Cost Control: By locking in , you avoid the risk of sudden price hikes, allowing for better financial planning.
3. Supplier Relationships: Long-term agreements foster stronger relationships with energy suppliers, often leading to better service and support.
When considering a long-term contract, it’s crucial to thoroughly evaluate the terms and conditions to ensure they align with your business needs and future plans.
Avoiding Frameworks: Tailored Solutions Over One-Size-Fits-All
Framework agreements, while convenient, often lack the flexibility needed to respond to the specific requirements of your business. Here’s why avoiding frameworks might be beneficial:
1. Customisation: Individual contracts can be tailored to your unique energy consumption patterns, providing a more efficient and cost-effective solution.
2. Competitive Pricing: Allowing us to negotiate with suppliers can result in better pricing and terms compared to the fixed options available in frameworks.
3. Innovative Products: Suppliers are more likely to offer innovative and bespoke strategies when not bound by the rigid structures of a framework.
By steering clear of frameworks, your business can leverage bespoke energy solutions that are better aligned with your operational needs and financial goals.
Fix and Fall Products: Mid-Market Flexibility
In a volatile market, flexibility can be just as important as stability. Fix and fall products, offer a balanced approach:
1. Fix and Fall: This product allows you to blend your current energy rate with a new, extended contract rate. If prices fall, you can benefit from a lower average cost without the need to renegotiate your entire contract.
2. Risk Mitigation: Fix and fall products reduce the risk of being locked into a high rate during a market peak, providing a safety net if prices drop.
3. Budget Predictability: These products maintain a degree of predictability in your energy costs, essential for long-term financial planning. To make the most of fix and fall products, it’s advisable to regularly review market trends and work closely with your energy broker to identify the optimal times for blending and extending your contracts.
Powering Up Your Energy Strategy
Managing your energy budget in a rising market requires a strategic approach that balances stability, flexibility, and customisation. By securing long-term contracts, avoiding inflexible frameworks, and utilizing innovative products like Blend and Extend, your business can navigate the challenges of a volatile energy market effectively.
By following these guidelines, your business can achieve greater control over its energy expenditure, ensuring sustainability and profitability even in a rising market.
Read our further article below to find why frameworks are costing you money...
Article 2. Why frameworks are costing your Trust money
In the dynamic landscape of energy markets, many Trusts in the UK are unknowingly overpaying for their energy. This financial burden often stems from reliance on rigid frameworks for energy procurement. Framework agreements, while seemingly convenient, can lead to significant overspending and inefficiencies. In this article, we will delve into why frameworks are costing your trust money and how adopting a more strategic approach can yield substantial savings.
The Drawbacks of Relying on Frameworks
Framework agreements are designed to simplify the procurement process, offering pre-negotiated terms and prices. However, these agreements often come with several drawbacks:
1. Lack of Market Insight: Frameworks typically do not account for real-time market fluctuations. Trusts using these agreements purchase energy on a fixed schedule, regardless of market conditions.
2. Fixed Purchase Times: Many trusts buy their energy on the same day each year, ignoring whether it is an optimal time to make such a purchase. This approach can result in paying peak prices.
3. Inflexibility: Frameworks offer limited customization options, preventing trusts from tailoring energy contracts to their specific needs and consumption patterns.
The Financial Impact of Inflexibility
When trusts rely on frameworks without leveraging market knowledge, they risk overpaying for their energy. Here’s how this impacts their finances:
1. Missed Savings Opportunities: By not monitoring market trends, trusts miss opportunities to purchase energy at lower prices. This reactive approach can lead to substantially higher costs.
2. Inefficient Budget Allocation: The inability to adjust purchasing strategies according to market conditions results in inefficient budgeting. Trusts end up spending more on energy, diverting funds from critical areas like patient care or educational resources.
3. Higher Rates: Framework agreements often come with fixed rates that may not reflect the best available prices. Trusts locked into these rates are likely overpaying compared to more flexible, market-responsive contracts.
Strategic Purchasing: A Better Alternative
To avoid the pitfalls of frameworks, trusts should consider adopting a more strategic approach to energy purchasing. Here are key strategies:
1. Market Monitoring: Regularly monitor the energy market to identify trends and optimal times to purchase. This proactive approach allows trusts to capitalize on lower prices and avoid peak rates.
2. Flexible Contracts: Negotiate flexible contracts that can be adjusted according to market conditions. This includes options for blending and extending rates or only fixing prices when advantageous, this can also mean riding the day-ahead wholesale market should hedging not make financial sense.
3. Expert Consultation: Work with energy brokers or consultants who can provide market insights and help develop a tailored energy strategy. These experts can guide trusts in making informed decisions that align with their budgetary goals.
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