Energy and Utility Management Consultants

Utility Procurement

The Process

The tendering process these days for utilities is complex and demanding - not something to be done without a lot of knowledge and a very comprehensive understanding of the utility markets.

 

The decision on when to tender and the duration of a contract is determined by us from market information that we gain from our daily contacts with suppliers, the technical media and our daily reviews of wholesale market pricing which we purchase from an independent source. In some cases we tender up to 9 months in advance of a contract end date. Daily updates to the wholesale markets for electricity, natural gas and oil are published on our web site together with historical graphs.

 

Tendering

Once a decision to go to tender has been agreed with a client we ensure that the relevant Notice of Termination is issued. Then, from our knowledge of the suppliers, their billing record, efficiency, approach to customer care and where the supply market allows, we select suitable companies for inclusion on our tender list. For accounts that are on published tariffs, comparisons are made to identify and recommend the most economic tariff. Tender documentation is prepared and issued in sufficient time to enable suppliers to prepare their offers, for analysis of returns to be completed and for subsequent negotiations to be commenced with existing and alternative suppliers to obtain the most favourable supply contracts. We liaise with clients during this process and provide a written report on the results of the work. It should be noted that due to volatile nature of the energy markets, tender offers frequently remain open for acceptance for only a matter of hours and thus there needs to be a good line of communication between ourselves and the client representative so that agreement on accepting an offer can be made quickly.

 

Completion

On conclusion of a tender, we provide a written report on the results of the work. which includes:

 

a) the consumption for the last 12 months
b) the annual cost for this period
c) the annual costs based upon the current contract
d) the market price defined as one of the following:

     i) the renewal offer from the incumbent supplier

     ii) the average of the initial offers from the lowest three suppliers

     iii) the costs based upon the current tariff

e) the recommended offer
f)  the savings achieved between d) and e)

Once the formal contract is issued we check and approve it before forwarding it on.

 

 

Common issues we deal with include:

  • We ensure that terminations are provided to suppliers and that they are accepted. This avoids issues that can arise when transferring to a new supplier following the tender. This procedure has become more complex recently with several suppliers having a ‘termination window’, which can be as short as 1 month in duration.

     

  • Our Utility Account Managers check the portfolio prior to tendering to identify whether individual supply contracts can be aligned with a common group contract end date in order to gain the benefits of a larger volume, and thus better contract rates. Such additional short term contracting is undertaken as a standard part of our work.

     

  • Utility markets are monitored on a daily basis and recommendations are made for tendering during the best market conditions.

     

  • Where AMR meters are installed, this is highlighted in the tender to ensure that all suppliers who offer have reciprocal agreements in place with the Meter Operators.

     

  • Specific requirements regarding the contracting party and billing name are discussed with the client and are reflected in the tendering process.

     

  • During gas tenders the annual consumption is cross-checked against the Transco AQ and where the difference is more than 20% then we will request suppliers to offer on the basis of the client’s consumption (rather than the AQ) and we will attach documentary evidence to tenders to facilitate this.

     

  • Prior to closing tenders our Utility Account Manager will check the offers submitted and will liaise with suppliers where discrepancies occur. This is usually in relation to incorrect payment terms, volumes, tariff structures or incorrect core MPANs.

     

  • Our Account Managers will ensure that suppliers have credit-checked the contracting party before they make their offer wherever possible and we will note this in the tender report accordingly. All supplier’s payment terms relating to their offers will also be shown and the best terms will be negotiated with the suppliers before reporting.

     

  • Where suppliers feedback to us that the contracting party does not have a satisfactory credit rating we will liaise with the client to obtain a copy of the company accounts and/or agreement to provide a Letter of Credit and/or Parent Company Guarantee in order to maximise the chances of obtaining a satisfactory contract. The additional terms of all suppliers will be clearly shown in the tender report documents.

     

  • Where the client’s requirements include green electricity we will ensure that suppliers offer on this basis and check whether their offer is on a “cost neutral” basis (i.e. the green uplift is equivalent to Climate Change Levy), or whether their offer includes any green uplift and is CCL exempt. These will be entered into the tender so that all suppliers are compared on a “total contract cost” basis.

     

  • Where suppliers provide an offer based on a different tariff structure to the current one and it is half hourly metered, we will independently check the consumption for the alternative tariff using the half hour data issued with the tender. For example, one supplier provides offers based on an 8-hour night period whereas other suppliers provide offers based on the standard 7-hour night period.

     

  • Our Utility Account Managers check that suppliers have included all charges including DC/DA and settlements for half hourly supplies and any additional charges for AMR metering (if relevant). Most suppliers omit these charges, treat them as pass-through or show the costs in a different part of the offer, which can easily be overlooked if not checked.

     

  • We will ensure that the contracted volume is representative of the consumption to be used by the property to ensure that any “Take or Pay” penalty charges are avoided.

     

  • Where a supply in a portfolio is likely to have zero consumption, we will check whether the supplier will apply any additional charges to the account.

     

  • We will return to the 3 suppliers who have provided the best offers, plus the incumbent for second and third offers and report to the client as early as practicable to give sufficient time for the client to consider the recommendation and to return the signed contracts.

     

  • Our Utility Account Managers will negotiate any additional benefits from suppliers (such as free installation of AMR metering) and show these in the tender report.

     

  • We will report any Terms and Conditions that are pertinent to the client or the contract during tender reporting.

     

  • Our tender report will include a review of the wholesale market and include a graph showing the movements together with the percentage change in the market since the last contract was negotiated. This provides a cross-check that the recommended offer is acceptable in the current market conditions.

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