TPI Services A Smart Buying Strategy
Electricity is a top five operating expense for most businesses, but prices fluctuate unpredictably daily with supply, demand, and changes in weather. Organizations need a purchasing strategy that balances cost savings and risk mitigation to optimize electricity costs.
Reviewing different purchasing strategies and understanding the benefits of a managed buying approach allows a business to determine the best solution customized to its unique priorities.
TPI’s energy experts can provide expert guidance on strategies and tools to capitalize on market opportunities while supporting budget and facility needs.
Tailoring Your Electricity Strategy
Every business has different needs and risk tolerances that impact its electricity purchasing strategy. Understanding your organization’s business model, budget goals, and appetite for market risk is essential.
Factors like your facility size, operations, and flexibility around electricity usage should be considered. Analyzing your electricity usage profile, including on- and off-peak use and seasonal fluctuations is crucial for determining the right strategy for your business. Your energy provider can help analyze your usage patterns to help you understand these details and develop the right approach.
Comparing Electricity Purchasing Strategies
There are three main types of electricity purchasing strategies, each with its pros and cons:
One: Fixed Price Solutions
A fixed-price solution offers you price stability and simplicity. Make one upfront purchase decision for a contract term (e.g., 12-months or 24-months). You pay one fixed price per kWh, which stays the same for your contract term.
Benefits of Fixed Price Solutions
- Cost predictability from locked-in rate.
- Risk mitigation by avoiding market volatility.Budgeting simplicity with no rate spikes.
Drawbacks of Fixed-Price Solutions
- Potential to miss savings if market rates fall.
- Inflexibility to change your contract if business needs to shift.
Two: Index Price Solutions
With index price solutions, your rate fluctuates based on real-time wholesale market prices. Your costs will move up and down daily with market rates.
Benefits of Index Price Solutions
- Ability to capture savings when market prices drop.
- Price adjusts automatically based on market swings.
Drawbacks of Index-Price Solutions
- Unpredictable price volatility from month to month.
- Peak season spikes bring budget unpredictability.
Three: Layered or Managed Solutions
A layered or managed solution combines fixed and index strategies, taking advantage of market opportunities by locking in prices when they fall. With this approach, a percentage of usage is fixed while the remainder follows variable market pricing. The fixed portion provides budget certainty during high-cost events like cold snaps or extreme heat waves. This blend balances cost stability with market price responsiveness to optimize savings.
Benefits of Blended-Price Solutions
- Balances cost and risk by fixing peak months and indexing savings months.
- Customizable to your business’s needs and risk tolerance.
- Budget stability from fixed portion against rate swings.
Drawbacks of Blended-Price Solutions
- Ongoing management needed to adjust blending over time.
- Partial peak exposure on unfixed usage portion.
Developing an Effective Managed Strategy
There is no one-size-fits-all electricity strategy with optimal year-round performance. Managing or layering strategies help address seasonal demand challenges, often improving pricing and lowering risk.
Key strategy elements include analyzing the organization’s usage patterns across seasons, days, and times to inform purchase timing. Purchasing managers can blend fixed rate blocks during peak periods while indexing low-risk months to capture potential savings. For strategy optimization, continual reevaluation and adjustment are essential as business needs and seasons evolve.
Expert Energy Guidance
Connecting with energy experts enables organizations to customize an electricity procurement strategy, ensuring ongoing optimization and guidance that balances costs, mitigates risks, and avoids pricing spikes during peak seasons. TPI Efficiency has proven experience providing strategic energy management tailored to customers’ priorities.
Source: Constellation
TPI Electricity Procurement Services Include:
Risk Management
Our tax experts can help you to develop a thorough and up-to-date tax plan that protects your cash flow and optimises your position for the future.
Contract Negotiation
You have enough to worry about without the administrative burden caused by indirect taxes like GST, stamp duty, land tax and payroll tax.
Bypassable Generation and Transmission Related Component.
Charges for purchasing power and delivering it through the transmission system. These charges are avoided when switching to a Certified Retail Electric Service provider.
Rider Exemptions
Our advisers can help you to land on the best possible structure for your business, protect wealth, reduce risk with full compliance.
Demand Response Options
If your company qualifies as an Early Stage Innovation Company (ESIC) according to ATO guidelines, your investors may be entitled to tax incentives.
Renewable Energy Consulting
Purchasing renewable energy is critical for most sustainability or carbon footprint reduction strategies. TPI assists companies in navigating the complex marketplace and steers them towards meeting their clean energy goals.
