Deregulation and Energy Procurement
There is no “one-size-fits-all” solution when it comes to energy supply. The most efficient supply strategy for a manufacturing plant in Manchester, NH may not necessarily be optimal for a hospital in Baltimore, MD. SPA continually monitors market trends and evaluates new offerings from suppliers to ensure clients are provided with options that best meet their individual needs. SPA combines historical data and projected market costs into executive summary models to provide straight-forward proposals for to clients.
The competitive retail energy market created by deregulation can be complicated (deregulation is relatively new, and the rules and regulations governing the market are still in flux). SPA has the expertise to offer clients a clear view into how deregulation creates opportunities for efficiency and cost-savings.
Navigating Supply Options
Determining the best supplier for a given client is a complex undertaking. Two firms with the same general usage requirements in close proximity to one another may be best served by completely different solutions. Factors such as peak power usage, organization of individual accounts and meters, and financial profile effect how a given supplier determines its offerings.
Volatility Finally, electricity and natural gas supply costs are in constant flux. Volatility is a reality of the energy market. Standard Power of America constantly monitors the NYMEX, Henry Hub, and many other sources to ensure its clients are expertly advised about the ideal time to lock-in energy expenditures.
Deregulated electricity markets experience substantial price and volume fluctuations (commonly referred to as Price Risk and Volume Risk). Because of this, financial risk management is often a high priority for electricity consumers. Price Risk in the wholesale electricity market is highly dependent on the market’s physical fundamentals such as generation plant type, peak usage demand, supply shortages, and weather patterns. Volatility manifests in the form of "spikes," which are hard to predict, and "steps" which reflect the underlying fuel and generation plant position changes over long periods. The uncertain quantity of consumption and production of electricity by market participants is collectively known as Volume Risk. A compounding factor is the common correlation between extreme price and volume events. For example, a ski resort is unable to predict demand until the weather forecast is known, resulting in a period of peak consumption. The resulting demand can cause the generation plant supplying the ski resort to experience a fuel shortage which can result in a power outage (Volume Risk). The power outage results in a price spike on the spot market (Price Risk).
To protect themselves from the volatility of these price and volume effects, electricity retailers enter into "hedge contracts" with each other. The structure of these contracts varies by region due to different conventions and market structures and is generally designed to transfer financial risks between participants.