Reducing the timing risk on the purchase of electricity

Customers looking to avoid the risk of locking in prices at a time when wholesale prices are high, or are looking to agree a longer contract without having to agree prices for all periods up-front are turning to STEP

POSTED 15/05/2018

If you procure electricity for your organisation, you’ll understand that with traditional fixed price commercial and industrial (C&I) contracts, the price you pay for the contract period is determined by the wholesale market on the day you sign your contract and this will be the price you pay for each year of your contract.

ERM Power’s Strategically Timed Electricity Procurement (STEP), gives large customers more control to agree prices over the term of the contract, providing a mechanism to reduce timing risk.

Instead of agreeing all prices up front as you do under a standard fixed price arrangement, you can agree prices in parcels as small as 5% for each set period (usually a quarter). STEP provides the opportunity for you to monitor market prices for electricity and many environmental schemes and spread timing risk over a longer period.

This method of contracting has been available via a manual process with ERM for some time, but was restricted to larger customers with energy consumption more than 40GWh per annum and the manual nature limited flexibility in terms of the number of transactions per period.

According to GM Product & Pricing, Dominic Ernst, smaller customers were approaching ERM for the product due to skyrocketing wholesale energy prices and we were determined to make this method of managing energy spend available to all customers.

“So we got to work and thought of ways to improve the program.  By taking the process online and automating the front and back-end of STEP, we were able to reduce the load threshold to customers consuming 5GWh per annum and above,” he said.

Improvements to the platform have also enabled ERM to provide more flexibility, with the platform now allowing up to 20 transactions per period and Dominic said this provides much more flexibility for our customers to agree STEP prices at different times.

“Prices are always 100% set before the start of a period.  Once prices are set, the contract operates similarly to a fixed price contract.  Importantly, there is no exposure to volatile spot prices,” he said.

Customers who have taken up a STEP arrangement come from a wide range of sectors including property, healthcare, manufacturing, government and education.  STEP online is available to customers with energy consumption of 5GWh per annum and above.

STEP online is accessed through our safe and secure Customer Portal where the platform is available 24/7 for access to current agreed price position.   Transactions can be agreed 10am-3:45pm on Sydney business days.

Watch a video demonstration and view real-life examples of STEP online in use or contact your account manager to arrange for one of our specialists to give you a personal demonstration.

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