Retail procurement options
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End-users have a number of options for dealing with energy retailers.
Using intermediaries to negotiate energy procurement
Significant benefits can be gained by using an intermediary when procuring energy. Intermediaries offer a range of services that assist end-users, such as:
- assistance to develop energy procurement strategies
- assessing current arrangements and advising on potential risks and opportunities
- advising on how and when to negotiate an energy contract
- providing information about market trends, particularly price trends
- assessing proposals from energy retailers and assisting in selection processes
- undertaking energy audits to find opportunities for energy efficiency, distributed generation, and demand-side response
- advising on appropriate metering infrastructure and reporting specifications
- aggregating your energy profile with others to secure more favourable terms and conditions.
Tendering
Going to tender requires a clear outline of requirements and rigorous process for assessing proposals. This requires a detailed understanding of existing and potential energy requirements.
It is best to involve key decision makers at each site and consider expected future requirements and flexibility of supply. It may be better to enter into shorter-term contracts if sufficient flexibility can’t be included in a longer-term contract.
Assessing proposals can be challenging. Retailers may provide information in a format which is not easily comparable.
When preparing requests for quotes, specify how you want information provided including the level of disaggregation. Ideally, you will be able to separate out network charges, metering charges and renewable energy costs. You should also be able to separate parts of retail energy cost including wholesale energy, ancillary service charges, network losses and retail margin.
When comparing quotations it is important to understand the different pricing elements. For example, one supplier may have quoted a low energy price but higher environmental charges.
Negotiating environmental credits
There are a number of federal and state level markets for ‘environmental credits’ created by governments to implement climate change and renewable energy policy.
Retailers pass the costs of complying with these schemes onto end users. It is useful to take account of these costs when comparing tenders from prospective suppliers.
Retailers often set their charges based on the expected compliance costs and what they believe the market will bear. They may also charge a premium to the actual costs they expect to incur to compensate for price risk and scheme administration costs. Negotiation is possible around these costs.
End-users may also be eligible to generate certificates under these schemes through prescribed activities. Certificates can then be sold on the market or to retailers in exchange for reduced energy charges.
Read more about mandatory obligation schemes.
