By Jason Patel
Head of Business Development
SK Energy
Can businesses risk being flexible?
The wholesale market looks set to remain volatile, particularly as Brexit uncertainty continues, which can make it difficult for businesses to decide on their optimum approach to procurement. At SK Energy, we’re often asked ‘Should my business opt for a fixed or a flexible approach in the current market?’
There is no one-size-fits-all answer to this question – the ideal strategy will depend on your business’s unique requirements. With wholesale costs rising once again, organisations may be tempted to lock themselves into a fixed procurement contract to provide budget certainty, in order to avoid further cost rises.
However, we would encourage larger business energy users to consider whether a flexible approach to procurement could deliver the best results for them. Some organisations might be deterred from exploring flexible products because they see flexible contracts as riskier than fixed contracts – but this is a common misconception.
What’s your appetite?
Your organisation’s appetite for risk is, therefore, a key consideration when deciding on the best procurement option for your business – but bear in mind that neither fixed nor flexible contracts are without risk. With fixed price contracts, a risk premium is built into your contract, which means that you will pay more than cost for the energy you use.
As the prices you pay in a flexible contract depend on the market, there is a risk that if commodity costs continue to rise, you could find you’re paying more than if you had fixed. But in reality, many businesses in fixed contracts open themselves up to risk by not fixing their contracts until close to their renewal date, leaving them with little option but to opt for the current market prices. We urge anyone with a contract coming up for renewal within the next 12 months to get in touch and take action. Flexible contracts, on the other hand, allow you to buy at the right time.
External support can make a real difference when you’re choosing a procurement strategy – especially if you choose a flexible approach, which requires multiple buying decisions. SK Energy’s procurement experts have years of experience in the industry, along with a complete view of market influences, from commodity markets to long-range weather forecasting.
With this insight on hand, you can realise the benefits of a flexible strategy at a level of risk that’s acceptable to your business or opt for a fully fixed price, fixed term option. SK Energy aim to find the right solution for your business without bombarding or hassling you. The team do not pressure sell or dictate what you should do but guide and advise so you can make the right decisions for your business.
Visit www.skenergy.co.uk or call 01933 448622 to find out how the multiple award winning SK Energy Team could help you and your business.