ELECTRICITY, GAS & TELECOM PROCUREMENT INTRODUCTION
Our electricity, gas & telecom procurement service offers the opportunity for the retail end-user to participate in the two main benefits of a deregulated market - cost savings and price stability.
In a deregulated market, the end-user is allowed to purchase a commodity (electricity or gas) from a marketer, but still have that commodity delivered by the same local utility company through existing pipes or wires.
Purely a paper transaction, the change is invisible to the client, with the exception that now the client can negotiate with the marketer instead of having prices and terms dictated by the utility company. Thus, our electricity and gas procurement service can assist you in negociation and cost savings.
Electricity, Natural Gas & Telecom Procurement Benefits
It is actually quite common for utility companies to have to purchase - from other generation companies, producers, or marketers - the electricity or gas which they in turn sell to their customer base.
In our electricity, gas & telecom procurement service, we understand that deregulation allows the retail end-user to go to those same producers or marketers and structure their own deals; something that (in the case of natural gas) has always been allowed for the very large user.
With “bundled” service, a customer pays the utility company a single amount for the combined product of the commodity (electricity or gas) and the delivering of that commodity through the utility’s already established network of pipes or wires. The customer also enjoys the other benefits it has come to depend on from the utility: reliability, customer service, assistance during outages, meter-reading, rebates, etc. A bundled bill has contained within it a line item for all of those services (although they may not be delineated on the bill). Our electricity and natural gas procurement service manages this bundling.
With deregulation, the utility continues to charge for everything except the commodity portion of the bill, but continues to provide – and charge for – all the previously mentioned services.
The customer pays the producer or marketer for the commodity and the utility continues to deliver that commodity.
While bundled service is convenient for the customer, it typically does not allow for long term pricing predictability, protection from market upswings, the ability to take advantage of short term market fluctuations, or hedging strategies.
Each customer has its own reason for purchasing deregulated commodity, but it typically boils down to a desire either for more budget certainty or possible savings.
Budget certainty is possible because, with a marketer, it is possible to “lock in” a price for a specific period of time – up to five years or longer. In addition, sometimes hedging strategies can be designed specifically for a client.
Savings, on the other hand, are possible by using a marketer who has access to pricing strategies and buying flexibility that the utility company does not have access to.
Each choice has its own risk associated with it. A customer, by locking in a long term price, does alleviate the risk of paying unexpected increases if the market has an upturn due to unforeseen causes such as a natural disaster, but risks not being able to participate in any market downturn.
A customer that plays the short term market may be exposed to volatility by not being protected by a collar or hedging strategy (which can of course be implemented, but reduces the savings a little).
Typically, one of these benefits is either more important to the client, or fits the company philosophy better. McKenzie & Associates works with its clients to help them determine their own priorities and level of risk tolerance.
End-users considering deregulated procurement for the first time are usually put at ease to learn that many times the utility company and marketer have an arrangement whereby the utility company bills on behalf of the marketer on its own bill, so the end-user still only receives one invoice and writes one check – with the commodity and delivery charges separated.
Clients can also be assured that marketers must go through a very rigid screening process, dictated by the local utility, for creditworthiness and stability, before they are allowed to operate in a utility company’s territory.
We will manage the electric and gas commodity purchase process to ensure best available cost and efficient contract management. The purpose is fourfold:
ensure that sites in deregulated gas and electric states receive the lowest possible pricing from viable vendors
ensure that vendors are managed and their invoices are accurate and as negotiated
ensure that all contract documents are maintained and renewal status monitored
provide accurate records of contract status and savings achieved
