PROCUREMENT (continued)

INTRO

While bundled service is convenient for the customer, it typically does not allow for long term pricing predictability, protection from market upswings, the ability to take advantage of short term market fluctuations, or hedging strategies. 

Each customer has its own reason for purchasing deregulated commodity, but it typically boils down to a desire either for more budget certainty or possible savings.

Budget certainty is possible because, with a marketer, it is possible to “lock in” a price for a specific period of time – up to five years or longer.  In addition, sometimes hedging strategies can be designed specifically for a client.

Savings, on the other hand, are possible by using a marketer who has access to pricing strategies and buying flexibility that the utility company does not have access to.

Each choice has its own risk associated with it.  A customer, by locking in a long term price, does alleviate the risk of paying unexpected increases if the market has an upturn due to unforeseen causes such as a natural disaster, but risks not being able to participate in any market downturn.

A customer that plays the short term market may be exposed to volatility by not being protected by a collar or hedging strategy (which can of course be implemented, but reduces the savings a little).

Typically, one of these benefits is either more important to the client, or fits the company philosophy better.  McKenzie & Associates works with its clients to help them determine their own priorities and level of risk tolerance.

End-users considering deregulated procurement for the first time are usually put at ease to learn that many times the utility company and marketer have an arrangement whereby the utility company bills on behalf of the marketer on its own bill, so the end-user still only receives one invoice and writes one check – with the commodity and delivery charges separated.

Clients can also be assured that marketers must go through a very rigid screening process, dictated by the local utility, for creditworthiness and stability, before they are allowed to operate in a utility company’s territory.

We will manage the electric and gas commodity purchase process to ensure best available cost and efficient contract management.  The purpose is fourfold:

• ensure that sites in deregulated gas and electric states receive the lowest possible pricing from viable vendors
• ensure that vendors are managed and their invoices are accurate and as negotiated
• ensure that all contract documents are maintained and renewal status monitored
• provide accurate records of contract status and savings achieved

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