Simplify your energy procurement
Understanding the complexities of your energy contracts and how to procure the best rates can be a tricky business, so we’re here to help simplify that process for you and ensure that you don’t pay more than necessary. At Monarch, we offer several different energy procurement options which we can tailor to you and your business requirements. Your decision as to which option you choose might depend on your appetite for risk, your need for budget certainty, and wholesale market conditions at the time of procurement.
We can purchase all required energy on a single day, or spread purchases over a longer period to take advantage of potential lower market prices. Alternatively, we can offer a combination approach, where some of the energy is bought at a fixed price, and the rest is left to float for a longer period. We can also purchase energy automatically prior to the start of the contract, or procure throughout the contract on the day-, week-, or month-ahead market. It depends entirely on our client’s appetite for risk and how much of a necessity they consider budget certainty to be.
When we gather quotes from various suppliers, we present them to our client on a like-for-like basis ensuring that clear comparisons can be drawn. We place the details of all quotations from suppliers in a scoring matrix to calculate a score for each contract, influenced by our client’s specific requirements. The list of criteria includes payment type and duration, energy type, contract dates and duration, and – crucially – the cost. We understand that different organisations value different elements of a contract more than others, so we use this information to tailor our negotiations with suppliers and provide a personalised service.
At Monarch, our procurement options are a standard fixed-term contract (SFC), a market-orientated fixed-term contract (MOFC), and a flex-hedging contract (FH). All are very popular with our clients and focus on different areas with different benefits.
Standard fixed-term contract (SFC):
This option focuses on budget protection. If you want to establish your expected energy costs in advance, then this is a procurement option that allows you to do so. However, we don’t consider market conditions with this type of procurement as the customer makes the decision as to when they need the energy, and whether or not they are happy to pay the price. It’s a low-risk option with a simple procurement technique, and is perfect for budget certainty. It’s important to remember, however, that suppliers do not disclose non-commodity values so it’s harder to know exactly which parts of your expenditure are going towards your energy costs, and what goes towards non-energy charges.
Market-orientated fixed-term contract (MOFC):
This contract procures energy based on optimal market conditions. We advise clients on when the best time to purchase energy is, as the purchasing window can be as wide as 36 months. We implement a floating budget cap to protect budget levels, making this option another good one for a high level of budget certainty. Much like with SFCs, suppliers do not share non-commodity charges with us for MOFCs. This means that we cannot validate those charges, but procuring the energy at a favourable time according to market conditions counteracts this in terms of overall value.
Flex-hedging contract (FH):
Our final procurement option allows our clients to spread their energy purchasing over a number of periods, rather than committing 100% of their energy requirement to a single purchase. We monitor the market for our clients and make purchases at more favourable times to maximise savings. FH contracts bring a high level of transparency as all costs are itemised, showing exactly where your spending goes. The main negative to this approach is that the client isn’t provided with full budget certainty until all purchases have been completed – due to the volatile nature of the energy market – but this can sometimes reap rewards. If your organisation is prepared to take a few risks, this option is perfect.
Monarch’s route to successful procurement:
- Contract negotiation
- Sophisticated trading and risk management
- Consumption management
A key part of our procurement process involves setting KPIs and SLAs. This is so that the success of the procurement strategy can be measured, allowing for continuous improvement. Our risk management and hedging strategies are client-specific and are based on individual clients’ targets and service requirements, so we really do personalise the entire procurement process from start to finish.
If you are interested in our intelligent procurement strategies, give us a call on 020 8835 3535 or drop us an email: firstname.lastname@example.org