We were working on some analysis for a potential client recently and thought we'd share the information with others. We've often talked about the power of seeing market prices. It is our view that identifying good buying opportunities based on where the market is (high, low, flat) makes a tremendous difference in avoiding additional cost. When we did the following analysis for a NY City based client, we learned how significant that difference can be. Take a look at the following graphs...
 |
| Change in cost due to forward curve movement (Fixed price cost for 12 month term starting in Jan 2012) |
The top graph shows the change in total budget costs for a fixed price contract in NY City's Zone J. The changes are driven by moves in the forward curves over the period from June 2010 to June 2011. The bottom graph shows the same data, but in different units (instead of total dollars, we show $/kWh or unit cost). So, if the client had had the ability to see these changes in the market price over time, he or she could have avoided $180,000 worth of cost. While no one will ever time the market perfectly, picking the right time to buy can be very powerful. The information provided here really demonstrates two things about how people who buy power should think about the process:
1) As a commercial or industrial customer, you are always short and should always be shopping.
2) Doing this reasonably well can make you a hero in your organization.
No comments:
Post a Comment