BidEnergy Insights

Energy Sourcing: when is the best time to go to market?

Posted by Stuart Allinson on 28-Sep-2016 16:23:43
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It's a question that many clients pose - and if we had the perfect answer, we would be very wealthy. Without the crystal ball, we can use data and logic to triangulate an answer - which has three equally important components.

Can I Exploit Market Timing?

It's pointless understanding timing opportunities if you can't act on it. This requires having your data in good shape to mobilise, and a governance process that pre engages with stakeholders to be clear on your sourcing requirement and the approval process.

Utilities are typically obliged to provide your data within 10 business days of a request but they don't always comply. Buyers holding data "on-demand" have a 2 week advantage over others. At the other end of the process - offer acceptance - the best organisations are oriented to gaining internal approval within 1 week or less of receiving valid offers. This has a dual benefit: reducing the risk of offers being withdrawn if the market moves adversely; and enabling suppliers to close out their open trading positions quickly, ahead of other offers issued to the market at the same time.

Do I have Discretion over when I go to Market?

Organisations that are in position to go to market 6 to 12 months ahead of current contract expiry have the capacity to enter and re-enter the market at any time up to 1 month before contract expiry. Less than a month and the scope becomes severely constrained - even compromised. Within this window, it is not unusual to receive a "take-it-or leave it" offer from your current supplier. At this stage, they have a sniff that you might not have the capacity to run a competitive process and the offer they table - maybe a 3 year lock-in - may suit them more than it suits you.

For example, contracts expiring June 30th should ideally be taken to market before the end of May. It is possible to run a competitive process beyond then, but there are risks that can only be mitigated with good process and decent technology.

What is the market telling me?

First, it is not possible to tell from talking to 2 or 3 retailers. There are 16 business sector retailers, all with different trading positions at any point in time. Unless you are engaged with all of them, you or your consultant - cannot possibly know the answer to this question.

Second, your requirement (size, shape and location) has a strong influence on the pricing that you can access - meaning that pricing information comes with a health warning, until it can be translated into your usage profile.

BidEnergy does not have a crystal ball, but we are enabling all of the above, using sophisticated technology and analytics.

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