Three tips to get the timing right for buying your energy contract

Most businesses will not purchase anything else where prices fluctuate by nearly as much as that of energy.

As a global commodity, energy prices are not only vulnerable to trends in supply and demand, but also the perception and sentiment of customers and speculators. Falls and rises of up to 10 per cent a day have been recorded.

This demands a more strategic approach to energy buying and makes the role of the energy buyer all the more important. Nobody wants a price shock at the end of a contract!

This creates opportunities for businesses to save signification sums of money by identifying the best time to purchase.

Here are 3 expert tips to help your business get the timing right.

(1) Do not be governed by your contract renewal dates

Many businesses fail to take full advantage of variances in the energy markets, as often they are unaware that they do not have to wait until they are nearing the end of their current contract, to sign up for their next contract.

Rates can be “locked in” over 12 months in advance of your expiry date, allowing you the opportunity to benefit from dips in the market, even when you are only part way through an existing contract.

(2) Make sure you are aware of all termination dates

This is the date when you can either renew your contract or cancel it to give you freedom to move to a different supplier.

Problems frequently arise when customers don’t renew, and overlook the termination period too. This usually means they are put on to a default “out of contract” rate which is inevitably higher than they should be paying.

The best way to avoid these “out of contract” rates is to terminate existing contracts before the supplier’s termination notice deadline (typically these are between 30 – 90 days, though vary from supplier to supplier). You should be notified of these dates by your existing energy supplier.

If you do find your business is on “out of contract” rates, act quickly and negotiate a new supply contract.

(3) Plan ahead

The business energy market is extremely volatile and to guarantee an effective and informed energy procurement strategy, you need to plan ahead.

For example, we recommend companies identify a top price and lower price that they are prepared to pay for their gas and electricity contracts. Prices can then be tracked in line with these upper and lower limits.

If the energy market triggers either limit, you can then review whether an early renewal is a viable option or to wait. Either way, you have the market intelligence to make an informed decision, in line with your strategy and business requirements.

Looking 12 month or more in advance of your expiry date, also allows you to plan for any changes in your energy portfolio – i.e. acquiring new sites or downgrading existing ones. Such decisions need to be incorporated into your energy strategy, as they could result in significant penalties. What to do in a power cut

Richard Bennett is business development director at UES Energy, part of energyTEAM.

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