What are procurement solutions?
For gas and power there are various types of procurement solutions available to business consumers. What will be right for one business will not necessarily be right for the next. As such, it is vital the energy broker understands the needs, wants, and expectations of each client.
What are the 3 types of procurement?
In the main, there are three types of procurement, fully fixed, partially fixed, or flexible purchasing.
Fully fixed means that the price cannot be amended once the contract is agreed. This will attract the highest tariffs as the risk is all taken by the energy supplier.
Partially fixed means that some parts of the costs can be amended after the contract starts. This puts some of the risk with the consumer and as such will result in a lower tariff rate, but it is likely that additional pass-through charges will be levied during the contract period.
Flexible purchasing means the consumer can lock in energy prices at intervals of their choice before delivery (this could be before the contract is live or during the contract term), providing scope for consumer costs to fall if the market falls over the contract term.
Things to look out for
There are some things to look out for when you appoint a broker to help you with energy procurement.
Most importantly, transparency and disclosure. Particularly around the fees being charged by your broker. Often this will be by way of a commission built into the unit rate of the supplier’s contract. In essence, the consumer will be paying the consultants fee indirectly through their gas or electricity billing. Always ask your broker to document their fee on the quote.
We would also suggest never agreeing to a contract over the phone. We have listened to many partial recordings and our clients have told us that during the unrecorded parts they were told that the rates on offer were the “lowest on the market” and given comparisons. This was untrue but when the all-important verbal contract is recorded the operator only records part of the call. Hence the client has no evidence showing they were lied to, and mis-sold. Our advice is to always get the contract emailed so you can review it properly.
For small consumers, a fixed price contract will be suitable and the only type on offer available. However, even with this relatively simple contract, there are still multiple considerations to take into account, such as contract term, plans for growth or downsizing operations.
The key to securing the best contract isn’t always price, it’s what is the best fit for your business needs.
What is for sure is obtaining quotes from the market, can be complex, and as always, the devil is in the detail.
A good broker will explain the differences, and guide you based on your own needs, wants, and expectations.