November 2022 Volume 4

OPERATIONS & MANAGEMENT

Making Fact-Based, Not Fear-Based, Energy Procurement Decisions Recently, we ran an auction for a client in the Midwest. Like any high-energy use business (and the forging industry is among the most energy-intensive), they were dreading having to go to market with electricity prices so high. In fact, they told us ahead of time that they would not go out further than two-years (i.e., they would not sign an electricity contract beyond 24-months because of current high prices). We understood their reluctance but counseled them to at least consider longer term lengths based on the data. We asked them to simply watch what the auctions yielded and base their decision on the facts.

What do you think happened? Transparent Energy ran a textbook auction. First, we aggressively marketed the customer’s RFP, attracting nine suppliers to bid on their load. Consider that: nine! (That’s another reason you should be working with us to procure your energy: supplier liquidity. When you increase the number of qualified suppliers bidding on your business, competition increases, driving down your price. In other words, you win!). Then we had the suppliers bid on 5 different terms (three of which went beyond the customer’s preferred 24-month window) on a fixed-price product. That’s when the magic of the auction process truly revealed itself. Over the course of 43 minutes, the suppliers bid 324 times, driving down their prices. But the process also revealed something that totally won over the client: suppliers were willing to dramatically reduce their price/kWh the longer they went out .

Once the auction process delivered facts to the client, the buying decision became that much clearer. The winning bid for a 60-month term delivered a price/kWh savings of nearly 10% compared to the 24-month term, a huge difference, especially considering the client purchased 20 million+ kWh of power. Simply put, the online auction process changed the client’s mind. The buyer got to see for itself how the market priced a fixed-price electricity product over a 1-year, 2-year, 3-year, 4-year, and 5-year term.The 5-year termdelivered a much better price – enhanced even further by the competitive dynamics of the auction – one that made the pain of buying electricity during a time of great volatility and expense (and which many experts fear will get even worse) much less severe, in fact, even manageable. Put another way, the auction gave them options. Knowing those options made all the difference. You deserve to know your options, too.

To know your options, reach out to us today. Contact Jonathan Le at jle@transparentedge.com.

Luke McAuliffe, CEP President of Transparent Energy

FIA MAGAZINE | NOVEMBER 2022 55