Supplier Side Of course, there are two sides to every story and while the buyer’s side is one of forcing the supplier down to the best possible price, suppliers find benefits, as well. Although the World Energy auction forces them to sharpen their pencils, they know that if their market position allows them to win the bid, they can expect a fully executed contract within a couple of hours of the auction. As pointed out in an earlier scenario, this minimizes their financial risk and lowers their cost of acquisition. Lessons learned on the supply side actually helped a top 10 investor-owned utility located in the northeast realize benefits on the buy side.
The utility was looking to procure five billion kilowatt hours of supply. World Energy sliced the load into separate pieces (by various terms and pricing mechanisms) and ran multiple auctions with a total of 13 suppliers – five of which were awarded contracts. The state Public Utility Commission was intrigued with the process and observed the auction in progress. Result: The auction yielded a 7% price reduction, saving ratepayers as much as $35 million. Not only was our customer satisfied, but the Public Utility Commission was impressed with the transparency and cost savings generated and commended the open format and subsequent audibility. Buyer Side A consultant working with the same northeastern investor-owned utility often runs complex, multi-phase transactions. Determined to put World Energy to the test, he divided the load to be procured in half and ran two events in consecutive weeks: the first using the World Energy Exchange, and the second using the traditional, paper-based process. Result: With identical amounts and the same structure, the World Energy auction yielded a price 20% lower than the result using the traditional method – even though there was no appreciable change in wholesale market pricing between the two events. Back |
