Aggregation

(c)2009 F. Bruce Abel

In England deregulation of natural gas began way before it started in America. Here is the best blog so far -- called "No Hot Air" -- on why villages and towns do not need the energy consultant nor the fixed contract with the unknown supplier. Herein also the pricing against index option, a concept that I am not familiar with at the moment.

http://nohotair.typepad.co.uk/no_hot_air/want-an-energy-consultant.html



No Hot Air
Pages
http://nohotair.typepad.co.uk/no_hot_air/coming-july-2009-wwwigasandelectriccom.html
About No Hot Air
About the Links to Switching Sites
Contact Us
Need an Energy Consultant? Maybe Not.
Recent Posts
Statoil Hydro opens up
NPR's Morning Edition on Shale
Smart Grid Savings
And even more gas on the way..
Who to believe on gas prices?
Strange Bedfellows
Sunspots!!!???
More on US LNG Exports...
Overgassed, underpriced and over here.
New light on new light
Categories
Books
Current Affairs
Design
Energy Prices
Energy Tech
Fixed Price Madness
Food and Drink
LED lighting
LNG
Next Big Things
Prices
Prices and Politics
Renewables
Science
Shale Gas
Smart Metering
Sports
Travel
Web/Tech
Archives
September 2009
August 2009
July 2009
June 2009
May 2009
April 2009
March 2009
February 2009
January 2009
December 2008
More...
About
Email Me
Subscribe to this blog's feed
Blog powered by TypePad



Need an Energy Consultant? Maybe Not.

No Hot Air provides just that: we remove the unnecessary layers of complexity that have arisen around buying gas and power for UK business end-users.

Over a third of UK end-users use third parties to negotiate energy contracts. We'd imagine that another third are active buyers with their own energy managers engaging with suppliers to varying degrees, and the other third, until 2008, didn't think energy prices were worth bothering about.

NHO is for energy buyers who want to think for themselves, but sometimes wonder where to start. That's OK. We're not judgemental. [Engligh post, remember?] Everyone's been there. Unfortunately, although every business is an energy buyer, only the largest can afford their own energy manager. But at today's prices, everyone is suddenly a large user.

Some businesses do need energy consultants, especially those with an engineering focus that concentrate on reducing use as the number one way to measure results. If a company doesn't have a clue about how much energy they use, has complex multi-site portfolios with supplier issues or has no problem with paying (directly or indirectly,often both) outsiders to resolve key issues that impact profitability, then an energy consultant can help.

In reality, few business users actually need the third party introducers (3PIs) that are a singularity, in global terms, of the UK business energy landscape. They were needed ten years ago. But today, 3PIs are as useful as Filofaxes, The Cones Hotline and Mr Blobby. Pfftt...
3PI's will disagree of course:

They say they can get a better price through competition. Not that competition has no impact at all.

They insist that aggregating consumption to their portfolio will get a better price. Not in a commodity market.

They explain how complex energy buying is. 3PIs owe their existence to arcane rules, inefficient metering and outdated pricing concepts. They have a vested interest in those market inefficiencies continuing, not removing them. NHO says energy buying can be far easier and uncomplicated with minimum investment and a little new thinking.

Many 3PIs are far less forthcoming on how they get paid. A 3PI's reason for existence isn't to cut your energy costs - it's to maximise their revenue. They do this by taking a part of the value that should be divided between supplier and end-user. And they often do this in ways that work against everyones' best interests. Except their own.

One of the easiest ways that 3PIs generate revenue is rampant in 2008: Sign clients at today's prices for long term deals. Do they do this because they genuinely feel energy costs will be higher in the future and fixing is prudent? Or do they need either an immediately larger commission or a guaranteed revenue stream for future years?Apparent free choice in energy is in reality affected by how options are presented. One pricing option is only offered by the most reputable 3PIs, self confident enough about the value of their work in other areas.That might explain why most businesses are never told about the option of pricing against an index: 3PIs can't make money out of a default option.
Index pricing was once only for large energy users, but today most suppliers can offer the option to any user. At NHO we don't confuse what happened in the past with forecasting the future. A rear view mirror is not a crystal ball. But we're open minded and unbiased: If we see a story that tells us that prices are coming down, we tell you about it. Readers don't have to act on it, nor on the reverse. But on the other hand, readers don't pay us for the information. We don't have a crystal ball. But no one needs to cross our palm with silver either. We aim to show ways to cut energy costs- and carbon- the old-fashioned way - use less of it.

3PIs will tell you at every opportunity about the dreaded R word: Risk. Maybe that's why they are as hard to get rid of as insurance salesmen. We tell you: Index prices go up and go down. Just like life. Price spikes, however unpleasant, are unlikely to have a major impact on business for anything more than a short term. Markets do dumb things sometimes. But they don't do dumb things all the time. Fix a long term price and - the price is fixed for a long term. A one year fixed price is definitely the best price - on 1 out of 253 UK business days. That's a risk too, and not the kind of odds to go to Vegas - or the board - with. Transparent index prices incentivise enterprises to reduce energy consumption and make efficiency adjustments at times and places where they deliver the higher savings and shorter paybacks. That helps buyers better assess the green options available today, some of which are just free range snake oil.

A fixed price may seem smart sometimes, but if the market turns then the risk is that fixed prices are a significant disadvantage. At NHO, we just don't know: but we won't charge you for the opinion. A fixed price will give you the best price for sure. On that day. Tomorrow? Most energy forecasting is glorified meteorology. Will it rain a week on Wednesday? Which way for oil, gas or coal? Will your pension go up or down? Most people don't worry - it's indexed. Why not energy?

Index prices for energy are the norm in most countries, even for domestic users. Fixed prices are an outdated concept in the UK today - they were born out of the 1990's. The dawn of UK competition coincided with a collapse in commodity prices. Many end-users mistakenly connected competition with energy price falls. It was mere coincidence. Not that a 3PI would point that out of course.Most countries now have utility competition: but in a world of rising commodity prices, competition is stillborn - <>only the largest multi-million pound end-users were offered index prices that performed even better. But today, the default option is the best option over time. No guarantees. But no buyer remorse. No second-guessing. No tiresome benchmarking. No blaming a consultant for high prices - but not paying commission for it either. The same prices as everyone else. Choose your supplier on service, which includes reducing volume and cost - price is irrelevant. In 2008 what was once a small spend is now a big spend - fixed or index. 3PIs are moving down the value chain to target inexperienced smaller gas and electricity users because at today's prices they make serious money from fixed contracts - the longer the better. But they won't make any money selling end-users the default option. Even they haven't figured out a way to make money by advising clients to do nothing. NHO is advertiser supported. Among those advertisers will be energy suppliers. But they won't pay NHO a commission for anyone's energy use. We think we can make money out of No Hot Air. But not at your expense.