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PUBLIC SECTOR ENERGY PROCUREMENT Getting back in control of your energy buying


Mark Doyle, Senior Corporate Account Manager at Gazprom Energy, examines the energy procurement options facing the public sector.

he government has become increasingly stringent when it comes to energy consumption and cutting costs, with the Department of Energy and Climate change pledging to spend £295m by 2020 to improve the energy efficiency of public sector buildings.

Subsequently, public sector

organisations have had to take a closer look at their energy buying and procurement practices. Energy is essential, but public sector bodies like local authorities managing varied property estates are often faced with a challenging job as they deal with considerable and complex energy usage. As a provider to the public sector we’ve recently seen

procurement managers become more focused on exploring the range of options available when it comes to purchasing energy, with the the need to be more energy and cost efficient spurring a shift in attitudes.

So what exactly has changed?

Traditionally, public sector organisations opted to purchase energy through frameworks or sizeable providers who were considered to be low risk. The evolution of frameworks within the energy industry meant that the public sector was able to purchase from pre-sourced and approved suppliers at agreed prices based on a variety of hedging strategies.

While low risk and competitive prices are still important to the public sector it’s not the only aspect governing their energy choices. Through increased austerity the public sector has had to become stricter with its purchasing options and get more creative with its energy buying approach. While the majority of public sector organisations have long relished in the benefits of frameworks many are now taking a proactive approach in choosing their own suppliers. To public sector organisations selecting an energy provider should be based on a range of factors: whether they’re low risk, cost competitive, able to offer in-depth market expertise, flexible billing and insight, and have a range of products to fit specific requirements. Indeed, the energy supplier should also demonstrate an enthusiasm to

help reduce energy consumption in line with targets. The public sector is now looking at these broader criteria when making energy choices. Advanced reporting and access to experienced market analysts have become more in vogue as the sector seeks to gain control of energy costs, develop an understanding of the market, and put itself in a more informed position to make the right decision.

Fixed contracts

For many years fixed price contracts have been the go to energy choice for the public sector, however we have started to see a rise in those looking at the potential benefits of flexible contracts.

Fixed contracts are effective for purchasing energy at low risk without the need for much management or intervention, given that they allow organisations to keep energy costs static and predictable throughout the duration of the contract, regardless of what happens to market prices. For any risk-averse organisation that needs a high level of budget certainty, fixed contracts have the appeal of not having to worry about price spikes or volatile energy markets throughout the duration of the contract. However, flexible purchasing contracts allow organisations to buy energy when they choose to at the current market price, trade energy as prices fluctuate, or simply let market fluctuations determine what they pay.

With an effective buying strategy, public sector organisations can in some instances, take advantage of cheaper rates, especially in the short to mid- term. Both fixed price and flexible purchasing contracts are valid choices for buying energy however it’s important to take a broad view of the market and review both options in full before making a decision.

Automated meter reading

With the government under way with its initiative to make automated meter reading (AMR) technology and smart meters a mandatory requirement, there has been an increase in the move towards bespoke billing and the use of AMR technology across the public sector.

AMR technology tracks energy usage, provides regular updates in real time, and digitally sends readings to the supplier, allowing organisations to profile their energy usage and avoid providing manual meter reads. It particularly benefits organisations with complex property sites, such as care homes and school buildings, as it helps to capture energy data that’s difficult and time consuming to track manually. The use of AMR devices has eradicated the need to estimate bills as organisations are able to monitor energy use and only pay for what they have used. Having the ability to gain bespoke billing information enables the public sector to understand with greater granularity, where energy budgets are being

spent and how to become more cost and energy efficient.

We’ve recently worked with a large local authority managing an estate of over 160 sites. Energy managers at the authority have often been faced with the difficulty of monitoring and managing energy usage. The installation of AMR devices has allowed the organisation to closely monitor collective energy consumption due to regular access to energy readings.

Accurate analysis

Accurate energy consumption analysis was essential for the local authority; it needed billing information in a format that could be easily integrated into its reporting tools without difficulty, removing the need for time consuming manual data input and transfer. Being able to easily pull energy data into broader reporting and analytics has also allowed the local authority to add vital information to wider business and energy performance plans. Since these changes, accurate and simple billing reports have allowed the local authority to factor its gas costs into broader council spending with ease, while AMR technology allows it to manage energy spend more efficiently and effectively. It is now able to avoid unnecessary periods of high consumption and identify and mitigate any unwanted anomalies; all helping the local authority to manage its energy spend more precisely. When it comes to buying energy, public sector organisations are much more aware of their options today than ever before and are seeking out the right approach that offers optimum value for money.

Of course, public sector buyers should remain risk conscious in their buying options; but factors such as the type of contract, the organisation’s energy consumption, and what opportunities there are to take more control of the energy buying process should all be part of the picture.

Prior to making a decision like this, organisations should approach a reputable and approved energy provider to understand its own energy consumption, current contract and how the different options available can support their specific energy requirements. VISIT OUR WEBSITE: BUILDING SERVICES & ENVIRONMENTAL ENGINEER MAY 2017 27 ‘ While the

majority of public sector organisations have long relished in the benefits of frameworks many are now taking a proactive approach in choosing their own suppliers. To public sector organisations selecting an energy provider should be based on a range of factors.

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