VESMA.COM training and conferences

Procurement of gas and electricity is a complex business with potentially significant potential for cash savings. A sound understanding of how the gas and electricity markets function is key to effective purchasing, bearing in mind particularly the trade-off between economy and simpicity of tariffs.

Who is the training for?

The material is intended for large energy users, consultants, energy bureaux and facilities-management providers operating in England, Scotland and Wales.

Background

For large users the market for gas and electricity is complex, continually changing, and fraught with risk, but effective procurement strategies can offer management options to yield significant cash savings.

Electricity pricing is notoriously complicated. The actual cost of energy is less than half the total with the remainder accounted for by transportation, distribution, metering and other non-energy components not to mention assorted levies and taxes. A fully-broken-down electricity invoice can comprise more than a dozen separate items.

There is a trade-off between simplicity and economy. If you choose a plain ‘one price per unit’ tariff your supplier is exposed to all the variable on-costs that you might incur—not to mention market price movements—over which they have no control. Understandably, they have to add a premium to cover themselves and that makes it an expensive buying strategy. At the other extreme, the savvy buyer might opt for a fully cost-reflective tariff with some degree of spot buying. Handled well, this is likely to yield the lowest overall cost. However, flexible contracts demand discipline, vigilance and a good working knowledge of energy markets, which is why some buyers compromise by using third-party intermediaries to negotiate and manage their supply contracts. That entails fees and even, sometimes, commission which raise the overall cost of supply; and whether these arrangements always insulate the customer from risk is a moot point.

Our instructor

Key to adopting the best approach is a sound understanding of how the gas and (particularly) electricity markets function. Our instructor, Alan Burgess, was the author of Contracting for power and gas, a handbook commissioned by the Major Energy Users Council in 2017. He was Energy Manager at South West Water from 1988 to 2018, responsible for an energy budget of £34M including, importantly, the integration of renewable generation (an increasingly common position which has a major impact on procurement strategy).

The training

Alan starts by explaining how the markets are structured, the roles and relationships of all the market participants, how they are remunerated, and thus their impact on final bills. Using real-life scenarios he discusses what if any steps a customer can take to minimise both their energy and non-energy charges, what risks may arise, and what active management is needed through the life of a contract.

Finally he explains procurement timetables and deadlines, the methods that buyers can use to negotiate the best deals, and how to evaluate the offerings of third-party intermediaries.

We will have break-out sessions during which you will carry out short assignments in small groups.