Delivering integrated energy solutions

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“The cheapest unit of energy is the one you do not buy.”

Procuring energy at the best wholesale prices available is important, but ensuring that every kWh consumed is used as efficiently as possible is equally as important. Maintaining that efficiency by monitoring and targeting consumption reinforces a proactive and integrated approach to energy management.

 

At Wholesale Power UK, we support our customers in all areas of energy management and through this all round approach that we form lasting, mutually beneficial relationships with our customers. Our services are self-financing and offer long term benefits.

What should you expect from your energy consultant?  At Wholesale Power UK our clients expect and receive:

-  Electricity and Gas bought directly on the Wholesale Market.

-  Risk Management through the analysis of Market trends and forecasts.

-  Competitive Pricing via flexible and fixed purchase options.

-  Direct Access to your Account Manager or Trader to receive instant feedback on pricing and future trends.

-  Financial Reports supporting site specific or group forecasts for forward budgets.

-  Technical Reports analysing your consumption profile to identify economies in tariff structures, timings, operational issues, etc..

-  On-site visits from our Energy Management Engineers to help you gain maximum production from minimum consumption

-  Expert Advice on other related issues, e.g. Legislative Compliance, Green Energy, Alternative Power Sources, Water Audits, Tenanted Supplies.

If you think that your business would benefit from the professional, personal service offered above, contact Jeff Hart at Wholesale Power.

Whatever your contract date start, we can start saving you money now.

Jeff Hart – 01524 34349 / 07715 102149 / jeff.hart@wholesalepower.co.uk

January 2012 Energy Market Update

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One size does not fit all……….   

Every company has priorities that drive purchase decisions, therefore procurement options need to be flexible enough to support any given strategy.

Currently Markets are showing a bearish trend, given the predominant issues with the economy and many companies are hoping for prices to ease – but are they actively waiting?

While the timing of market entry is the key to successful energy procurement, there are many useful things that companies should be doing while actively waiting for the best opportunity to buy in the market.

At Wholesale Power our experienced and dedicated consultants offer double digit percentage savings to clients by using our integrated energy solutions to:-

  • Monitor Wholesale Markets throughout each trading day.
  • Establish and analyse trends to identify opportunities.
  • Track anticipated seasonal weather patterns.
  • Consider the geo-political map.
  • Include issues of power generation going forward.
  • Pre-qualify supplies for contract acceptance.

We are ready to take advantage of price options at the push of a button – are you?

Most companies are unaware of the risks being taken by:

  • Looking at general rather than specific price levels.
  • Only considering options periodically as workload dictates.
  • Confusing an Offer Acceptance as a binding fixed priced contract.

Secure your future budgets with Wholesale Power UK Limited giving you access to Wholesale Prices irrespective of your load or contract preference, through two essential products:

Bespoke Contracts:

  • Available to large customers (> 20GWh) requiring flexible options, or any customers requiring fixed contracts.

Portfolio Contracts:

  • Available to medium sized customers (< 20GWh) wishing to adopt flexible contracts through portfolio options.

Wholesale Power provides access to Wholesale Markets and offers competitive end-user prices.

Can you afford to simply wait? contact us now to learn more…

Jeff Hart – 01524 34349 / 07715 102149

jeff.hart@wholesalepower.co.uk

Energy Risk Management

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UK wholesale electricity and gas prices are influenced by such a wide range of factors that it is hardly surprising that they should be volatile. Highly unpredictable worldwide events such as geopolitical problems and the weather affect prices, as do the more predictable home market energy supply and demand issues. Throw in exchange rates, European prices, security of supply and general market sentiments and you have a complex mix that can result in price volatility of 5% or more, over a few days and over 300% in the past 5 years.

How do you manage the cost risks and budget in such a market?

Fortunately, electricity and gas do not have to be purchased on  a daily basis; there exists a liquid wholesale market that allows companies to purchase energy up to 3 or 4 years ahead. If used correctly, this market can provide companies with the protection they need to budget for their electricity and gas requirements. In addition to managing the risks, this procurement strategy can also bring significant pricing advantages in the long term.

What are the principal cost inputs in a typical energy bill for a commercial/industrial company?

A)   ± 70% = the wholesale price of the electricity or gas

B)   ± 20% = the total distribution costs plus any carbon/other taxation

C)   ± 10% = Supplier Costs and Margin

B) is fixed and C) can only be reduced slightly – it is clear therefore, that time spent managing when and how energy is purchased is likely to produce the most positive results.

Traditionally, annual or longer-term energy supplies have been contracted on a single day (often referred to as a fixed-term, fixed-price contract). In a stable, predictable market, this proved to be an adequate way of contracting energy. However, in a volatile market, it is a high risk strategy; unless you monitor the markets every hour of every trading day, you have very little chance of securing a competitive price to coincide with market points.
The fixed price contract is a blunt instrument to use in a modern, volatile,  and technical market and can no longer be seen as a prudent method of procuring gas or electricity. This method suffers further from higher supplier margins & risk management charges to cover intra-day movements in price and the additional work involved in the ‘tender’ process.

In contrast, purchasing the same energy requirement in chunks known as ‘clips’ in real time in the futures market (known as wholesale procurement) avoids all the pitfalls of the fixed price tender method. Wholesale procurement facilitates the adoption of a robust risk management strategy that can enable more effective management of the price risks inherent in the current energy markets. The flexibility this method gives in both timing and quantity enables companies to budget ahead and avoid periods of temporarily inflated/speculative pricing.

Energy Market Update November 2011

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Energy Market Update

November 2011 - Overview

As we enter November prices have continued to soften driven by economic fears as a result of the issues with the Euro, the ongoing problem of Greece and the pressure on the Italian economy. Coupled with the concerns over the economy and the possible drop in demand due to threats of recession, mild temperatures have also had a bearing on markets and will continue to do so until colder temperatures arrive.

Even the changeover to GMT at the end of October, generally a trigger for an 8% increase in UK power demand, has been taken in its stride.The easing of supply and demand fundamentals will continue to drive the market and prices are close to the pre-tsunami levels before the onset of winter resets the positions. Opportunities exist at the moment for medium term positions to be taken, as various factors may well destabilise prices as fundamentals react to events.

Power Focus – Short Term Drivers

Volatility has been the key over the last couple of weeks, even though a bearish market sentiment exists. Oil has fluctuated within a $4 range reacting to the issue of the financial instability, the knock on effects of the EU discussions, the announcement and then retraction of agreements for the future, followed by the inability of the G20 countries to agree on a common lead and support for the IMF.

Bearish sentiments will however come under pressure from the forecasted low winter temperatures for December, January and February showing that basic supply and demand fundamentals can still drive prices in the short term. Forward markets will also be affected.

Market Focus – Short Term Opportunities

Since privatisation contract term periods for the majority of UK customers in the power market have migrated to an October start date, where 60%+ of contracts are now actioned. Many companies, caught out by the events of the Arab Spring and Japanese Tsunami earlier in the year had no alternative but to wait for the Markets to soften before committing to October 11 contracts.

Most could not recover their previous budgeted positions and face higher than expected demands on base costs which inevitably impacts immediately on bottom-line profits. As new contract rates start to affect invoices now reaching Accounts Payable there is a tendency to put the issue away until the New Year, when once again the shortened timeframe will leave customers vulnerable to world events. The volatility of Market Pricing, even though relatively calm at present, can still throw up opportunities in the market to establish sensible positions to mitigate against the risk of adverse events.

Some sentiment outside of the Market believes that prices will continue to soften and therefore opportunities for reduced contracts will be available in Q2 2012 for next October start dates. This strategy is full of risk, leaving companies open to world events outside of their control, a sentiment similar to late 2010/early 2011 before the tsunami.

It has taken Markets 8 months to return to previous levels taking us past the commitment date necessary for renewal. Putting the issue on the back burner again for “review” in 2012 is a major risk. Leaving the issues of the economy aside, problems further afield, such as in Syria and Iran, could worsen and destabilise the markets.

Risk management is about making provision to counteract issues that pose a significant threat. The ability to establish a position to protect forward budgets is a live issue that needs analysis and response on a daily basis. Leaving decisions to a calendar month at some point in the future is no longer a sensible option.

Note: The views expressed in this Update are for information purposes only and, although pertinent at the time of compilation, are subject to change.

Energy Market Update October 2011

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Energy Market Update

October 2011 - Overview

The energy markets eased throughout September 2011 but are still volatile. Prices at the end of the September closed lower than the start of the month and continued to do so through to the early part of October. Gas curve prices closed 6% lower and electricity curve prices fell by approximately 3.5%. The Brent Crude oil price saw the biggest falls closing 10% lower than the start of the month at around $103/Barrel.  The falls in September were attributed to the continued Euro-zone debt issues and the risk of global recession still looms large. With gas heavily linked to oil, wholesale gas prices fell following the drop in oil, which broke below the $100/Barrel mark for a second time in two months, reaching $99.50 during the first few days of October.  The higher than normal average  temperatures for the time of year led to a bearish electricity market which saw wholesale prices drop to a two month low in the first week of October.

However, as we start to enter the winter period, falling temperatures will cause some bullishness in the UK energy markets and the nature of any increases in wholesale energy prices will depend on how prolonged the colder winter conditions are to be. This is also the first winter without Germany’s nuclear programme and it is likely that, as they turn to other sources of energy generation, a higher demand for gas will put pressure on reserves in other European countries. Libyan oil supply remains subdued and several outages across the globe have contributed to the oil price holding firm. The oil price has bounced back recently to around $112/Barrel.

Power Focus – Short Term Drivers

As the UK approached the deadline for securing October 2011 contracts, a higher demand for fixing out positions added liquidity, price risk and volatility to the market. Supply and demand fundamentals will continue to underpin the power market as we approach the winter period. Maintenance to several power stations has created uncertainty over supply meeting demand through to Q2-12 and may add further premium into the wholesale power price. Continued pressure on wholesale gas prices will inevitably feed through to the power market.

Gas Focus – Short Term Drivers

A steady rise in the gas price is predicted in the short term following the recent release by Qatar Gas of their official maintenance schedule. Demand for gas fired generation will be more apparent as maintenance to nuclear power stations continues. If the oil price increases, this will feed through to the gas market. A tight supply system will increase gas prices as demand increases. The gas system will remain finely balanced if reports of lower LNG cargoes to the UK are confirmed.

Our Strategy

In a very volatile arena with little indication as to the real direction of the markets, it is important to take a considered approach to the buying strategy. There is still a chance that the UK and indeed Europe could fall back into recession which would cause a slump in the energy markets. Should this be avoided the markets would continue to follow the current trend throughout the coming months with windows of opportunity for drops in the market in the interim. However, there is always the threat of market turmoil as Middle East tensions continue. A flexible risk managed approach is therefore the best practice and we aim to hedge further volumes at appropriate intervals to avoid exposure to higher market prices.

Note: The views expressed in this Update are for information purposes only and, although pertinent at the time of compilation, are subject to change.

Wholesale Procurement reduces risk and price

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UK wholesale electricity and gas prices are influenced by such a wide range of factors that it is hardly surprising that they should be volatile. Highly unpredictable worldwide events such as geopolitical problems and the weather affect prices, as do the more predictable home market energy supply and demand issues. Throw in exchange rates, European prices, security of supply and general market sentiments and you have a complex mix that can result in price volatility of 5% or more, over a few days and over 300% in the past 5 years.

How do you budget and control costs in such a market?

Fortunately, electricity and gas do not have to be purchased on a daily basis; there exists a liquid wholesale market that allows companies to purchase energy up to 3 or 4 years ahead. If used correctly, this market can provide companies with the protection they need to budget for their electricity and gas requirements. In addition to managing the risks, this procurement strategy can also bring significant pricing advantages in the long term.

Pricing advantages compared to what?

Traditionally annual or longer-term energy supplies have been contracted on a single day (often referred to as a fixed-term, fixed-price contract). In a stable, predictable market, this proved to be an adequate way of contracting energy. However, in a volatile market, it is a high risk strategy; unless you monitor the markets every hour of every trading day, you have very little chance of securing a competitive price to coincide with market points. The fixed price contract is a blunt instrument to use in a modern, volatile, and technical market and can no longer be seen as a prudent method of procuring gas or electricity. This method suffers further from higher supplier margins & risk management charges to cover intra-day movements in price and the additional work involved in the ‘tender’ process.

In contrast, purchasing the same energy requirement in chunks known as ‘clips’ in real time in the futures market (known as wholesale procurement) avoids all the pitfalls of the fixed price tender method. Wholesale procurement facilitates the adoption of a robust risk management strategy that can enable more effective management of the price risks inherent in the current energy markets.

Wholesale Power UK specialises in procuring energy for clients directly from the wholesale markets and has a proven track record of beating the market average by over 15%. This lower risk, lower price option is growing in popularity.

In addition to managing bespoke contracts for larger customers, Wholesale Power UK also opens up this market opportunity to companies that would normally not have sufficient individual load to buy ‘clips’ independently. Such companies enter our portfolio arrangements, utilising the combined usage to achieve independent end prices that take advantage of market opportunities normally available only to large consumers.

Energy Market Update September 2011

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Overview

The energy markets remained very volatile throughout August 2011 with prices at the end of the month closing higher than the start of the month. Gas curve prices closed some 5% higher and electricity curve prices increased by approximately 2.5%. The Brent Crude oil price, however, closed over 2% lower than the start of the month at around $115/Barrel.

There has been a definite re-connect between the energy markets and the oil market since the Japanese Tsunami natural disaster in March 2011 and they have continued to track the movements of the oil price.

August 2011

The early falls in August were attributed to a renewed risk of recession and the global economic crisis. Curve contracts fell following bearish sentiment in the oil, currency and stock markets. Concerns that the US would fall into a double dip recession and the debt crisis in the euro zone spreading to Italy and Spain led to speculation of lower demand in the commodity markets. The Brent Crude oil price fell under £100/Barrel for a brief period on the 8th August and remained under £110/Barrel for a large part of the month.

The Libyan crisis intensified in the second half of August and there are fears that oil production to Europe from Libya may not be fully restored for some time.

Energy prices saw gains towards the end of the month as positive US economic data and a surprise drop in US crude oil stockpiles saw oil break through $110/bbl week ending 25th August. Continental demand for gas increased creating tighter margins to drive prices higher following the announcements of LNG gas maintenance in the coming months. The prompt market has seen the highest gains in August closing some 20% up on the start of the month.

 

Short Term Drivers

As the UK approaches the deadline for securing October 2011 contracts, a higher demand for fixing out positions will add liquidity, price risk and volatility to the market. Supply and demand fundamentals will continue to underpin the power market as we approach the winter period. Maintenance to several power stations has created uncertainty over supply meeting demand through to Q2-12 and may add further premium into the wholesale power price.

Continued pressure on wholesale gas prices will inevitably feed through to the power market, particularly if the oil price continues to firm. Reports of lower LNG cargoes to the UK will also add pressure on demand from a finely balanced supply system on the run up to Winter 11.

Strategy

In a very volatile arena with little indication as to the real direction of the markets, it is important to take a considered approach to the buying strategy. There is still a chance that the UK and indeed Europe could fall back into recession which would cause a slump in the energy markets. Should this be avoided the markets would continue to follow the current trend throughout the coming months with windows of opportunity for drops in the market in the interim. A flexible risk managed approach is therefore the best practice and a longer term market strategy is the key to good energy procurement
at present.

Scottish & Southern Electricity Achieve 5* Rating

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SSE, the Preferred Supplier who manage the Wholesale Contracts for WPUK, once again top the rating of the “Big Six” in the latest Consumer Focus Report.

SSE remained the supplier with least complaints and the only one to achieve a five star rating. SSE was buoyant after the figures. Director of Customer Service Tony Keeling said “We are extremely proud to be the only energy company to achieve the five star rating and we take the relationship we have with our customers very seriously. That said, we’re always striving to be even better and to raise the industry bar even higher. We are determined to build on this and improve our service even further so that it will set us apart from our competitors as we prepare for the energy market of tomorrow.”

The day to day management of data, invoicing, payment or general account issues is of primary importance to both WPUK and our clients. Managing Director Philip Hallsworth confirmed “When choosing a Service Provider for our clients it is imperative that clear lines of communication are established to deal with any account management issues that may arise. In general, yet again SSE is taking the lead, a position even more rigorously supported through their established relationships with our in-house Operation Team.”

For full details of the SSE response to the report click the following link.

http://www.sse.com/PressReleases2011/ComplaintsLeagueTable/

The full results can be found on the Consumer Focus website.

http://www.consumerfocus.org.uk/news/new-league-table-shows-mixed-picture-on-energy-complaints

Wholesale Power & the BFFF

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Who we are.

Wholesale Power UK (WPUK) is an energy consultancy that specialises in the procurement of wholesale gas and electricity for commercial and industrial consumers. Founded in 1989, the directors have over 90 years experience in energy procurement for a wide variety of companies, including many in the Frozen Food sector. Most importantly, their experience has been gained working for companies as Energy Managers as well as trading and buying for companies within a consultancy, e.g. our Operations Director, Steven Pye.   WPUK are members of the British Frozen Food Federation and the Food Storage and Distribution Federation.

What we do.

Electricity Procurement (Gas is treated similarly)

a)    For large consumers (typically over 20,000,000kWh per annum)

WPUK manage bespoke purchasing facilities for companies to
secure competitively priced energy on the wholesale futures market. Prices and forward positions are constantly monitored to carefully manage the risks in these volatile markets.

b)    For companies consuming less than 20,000,000kWh per annum –

WPUK manage a bulk purchasing facility enabling smaller consumers to benefit from the advantages normally limited to very large consumers.
With the combined consumption grouped together, WPUK can purchase energy direct in the Wholesale Markets offering discounted prices, more purchase options and risk managed consultancy support.

How does this benefit you?

Energy markets now operate in the volatile world of commodities trading. Prices are affected by the weather, natural disasters, political events, climate change issues, economic developments, etc… The traditional methodology of purchasing an electricity or gas contract at some point on the annual calendar, for the next 12 months, is no longer a credible management tool. With markets sometimes moving over 30% in a year, the most important factor became the timing of your entry into the market and the ability to manage the various threats to specific months, quarters or seasons within the year, on a forward basis.

In addition, prices can vary by as much as 5+% in a day, again making the acceptance of a standard tender a risky business.

WPUK trade their energy, live in the Wholesale Markets offering flexibility to purchase in real time and in portions of months, quarters, and seasons up to 3 or 4 years in advance. Allied to this, WPUK can also purchase a % of an energy requirement, during any period, allowing them to hedge against future risks.

Through bespoke or portfolio contracts, large or small WPUK customers enjoy the benefits of risk managed, competitive buying strategies. Invoices are issued in the normal manner by the administrative Supplier with payments made as before. Contracts are agreed for a minimum period of 2 years to allow WPUK to plan ahead with all portfolios starting from October each year.

Interim contracts to the entry start date will be negotiated, as required, by the Trading Team as part of the initial registration process.

What does it cost?

Agreed at the time of appointment, our fees are transparent and form part of the management fees charged under any contract organised by a third party consultant.  The benefit of Wholesale Contracts, however, is that Supplier Management Fees, also applied on all supply contracts, are
lowered compared to standard tender contracts, enabling the benefits of our service to be obtained on generally a cost neutral basis. In effect, as we use the Supplier to administer rather than compete for contracts, management fees can be reduced to allow you the benefit of Wholesale Trading at limited or no cost.

In addition to the benefits of end commodity prices negotiated on your behalf our services will provide you with cash positive results.

Case Study The Stobart Group

 

 

An example case study which shows just how much we can help a company can be found at Stobart Group Case Study .

Videos

We have prepared 2 videos (each just over 3 minutes long) to explain our approach to electricity and gas procurement. (I have included the
links to the videos on our blog – if you can view them on YouTube they tend to run better)

Market Risk – YouTube                 UK Energy Procurement – YouTube

Market Risk – WPUK Blog            UK Energy Procurement – WPUK Blog

Read more of the operating methodology of Wholesale Power in their 4 page brochure.       wholesale-power-uk 4 page brochure