Four Steps-Energy Risk Management

The current state:

Proactive risk management can help limit organizational exposure to energy market volatility.

Successful strategies apply forward-looking market analysis and facts in global, regional and national nuances.

Managing risk is imperative because risk and volatility are unavoidable.

Following are steps to build an effective, lasting approach to managing energy price risk.

The outcome…….lower costs…less exposure and more clarity.

Step 1: Build your strategy on independent intelligence.

  • Ensure any third – party energy consultant or energy broker has the ability to access several energy pricing platforms, such as, RFP’s, sealed bids and reverse energy auction platforms and independent energy market intelligence reports.

    This allows you to accurately benchmark electric and natural gas prices provided by energy supply companies and assures you of the best possible energy prices available by having at least three possible energy pricing platforms.

  • For large electric and natural gas users the best energy pricing platform is the Reverse Energy Auction Platform.

Step 2: Establish clear governance at the outset.
  • Out of date, incomplete or vague risk policy, inconsistent implementation, weak energy strategy process. All can result in an inappropriate level of risk.
  • Establish a set of energy management processes that will deliver the expected standard of service.
Step 3: Seek simplicity, efficiency and flexibility.
  • Select an energy consultant or energy broker that can help you develop and meet your energy risk management objectives across multiple regions and respond to your energy needs now and in the future.
  • Select one energy consultant for all your energy management services this will establish consistent, efficient, scalable and aligned services.
  • A single-source third–party allows the organization to deal with one centralized account manager for all related inquiries.
Step 4: Set KPI’s and track results.
  • The electric and natural gas markets have experienced unprecedented volatility over the last few years with dramatic cost swings from day to day.
  • Develop an energy strategy that meets specific objectives.
  • Clear focus on KPI targets for success and are they being achieved?
  • With the appropriate energy strategy a business can be more agile and respond quickly to electricity and natural gas market spikes.

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