Although many businesses like the idea of having a robust energy procurement strategy, some don’t have the time or resources (because energy is a relatively low percent of operating costs) to regularly review and make proactive energy purchasing decisions. Additionally, many of these same businesses wonder whether they have sufficient purchasing power to get a good deal.
Constellation, in collaboration with the Illinois Manufacturers’ Association (IMA), has recently introduced a new energy purchasing program for businesses looking to increase their purchasing power while limiting the amount of time and resources they need to put into following the markets. Constellation’s new IMA Energy Purchasing Program aggregates load from participating members and creates a structured, systematic, purchasing strategy to manage energy cost and risk over time. This program, unique to the IMA, allows members to benefit from the increased purchasing power of member aggregation while freeing up time for members to focus on their core businesses.
The program has been designed to meet member cost and risk objectives. A fixed price will be established over a defined period of time for 100 percent of IMA members’ anticipated load. The fixed price will be established using Constellation’s Minimize Volatile Pricing solution, which uses a transparent, proprietary methodology to reduce market timing risk while locking in fixed prices.
Through systematic purchases over a defined time period, members mitigate the market-timing risk associated with a single purchase. This systematic strategy also eliminates the guesswork and reduces the emotional aspect inherent in all purchasing decisions, freeing purchasing managers from trying to time the highs and lows of the market. Target purchases made on each member’s behalf are based on sophisticated modeling that aims to lock-in higher percentages of load when prices are low compared to historical prices, as opposed to basic cost averaging approaches that lock-in a fixed percentage at regular intervals regardless of market conditions.
In addition to the purchasing program participants will receive comprehensive monthly reporting on purchases and budget performance. Reports include a forecast of member usage and cost, comparisons of forecast to actual spend, and variance analysis.
The objective of the program is to provide a high degree of budget predictability while using a prudent purchasing strategy which benefits from the increased purchasing power that comes from aggregation. Constellation will be providing more details to IMA members through direct mail in the near future. If you are interested in implementing a similar program for members of your association, please contact us at 1-888-312-1563.