Guidance

Buying Energy: options for public sector buyers

Procurement options for gas, electricity and liquid fuel available from the Crown Commercial Service for public sector organisations.

Overview

If you are a central government department or public sector organisation, you can use the Crown Commercial Service (CCS) to buy a variety of energy related goods and services.

Introduction

The way CCS buys natural gas, electricity and other utilities for its customers is all about managing and reducing the associated risks by developing legally compliant framework agreements. CCS agreements are in line with the findings of the Pan Government Energy Project, which recommends that all public sector organisations adopt aggregated, flexible and risk-managed energy procurement. CCS takes the delegated authority to purchase gas and electricity on behalf of central government and wider public sector organisations, creating an aggregated committed volume to take to the wholesale market.

Procurement options

Framework agreements

CCS has a number of energy agreements for public sector organisations to access including gas, half hourly electricity, non-half hourly electricity and liquid fuel, avoiding the additional cost and resource requirements of running a compliant tender yourself.

As energy is purchased so differently to other commodities all parties (CCS, suppliers and customer) sign up to a three way agreement made up of the:

  1. framework agreement which is a legally binding document between CCS and the supplier defining the terms of the relationship and the service the supplier will provide to customers
  2. customer access agreement between CCS and the customer which provides delegated authority for CCS to purchase energy on behalf of the customer
  3. model contract between the customer and supplier which allows the supplier to deliver the customer’s energy

This three way agreement is designed to optimise energy procurement enabling the public sector to gain maximum benefit from volume purchasing.

CCS lets a framework to the successful supplier for the cost to serve element only (this is the cost to deliver the energy to customers). CCS then purchases the energy directly from the market and the framework supplier acts as a facilitator by supplying the purchased energy to the customer.

View further details of our current energy agreements

Procurement support

Energy.gov

Once signed up to a CCS energy agreement the energy.gov portal enables you to add new sites electronically making the process faster, more efficient and transparent. Through energy.gov you can also manage your whole energy portfolio:

  • access to your live sites in our portfolio
  • make changes to your sites and accounts
  • view your procurement summary including product selections and basket rounds.
  • view your pricing online

All of the suppliers also have portals which you can access through CCS agreements providing detailed information on your account and sites to help you make cost saving decisions on things like capacity and demand.

Operations

The operations team is responsible for the management of all of the electricity and gas agreements and the customers that use them. They are here to support you with your suppliers, portfolio, the framework agreements and energy procurement.

Typical tasks the team undertake include:

  • management and delivery of agreements
  • monitoring supplier performance
  • management of customer issues with suppliers
  • publication of monthly position reports, market commentaries and newsletters
  • co-ordination of customer, supplier and industry events
  • assistance with budget forecasting, changes in the industry and query management

Trading

By aggregating customers’ energy volumes into procurement rounds for delivery on 1 April and 1 October CCS is able to purchase energy directly on the wholesale market. This means costs such as risk premiums are eliminated. A skilled in-house trading team closely track the markets using Trayport Joule, a live wholesale market consolidator system, drawing pricing data supplied from the 4 main energy brokers (GFI, ICAP, Prebon and Marex Spectron). This facilitates minute by minute buying decisions, which allow CCS to capitalise on advantageous price movements on the wholesale markets.

CCS participates in the wholesale market alongside the largest energy market participants in the UK (eg generators, energy companies and financial players). This means there are no contractual or transactional premiums to pay and we can transact across all market quoted timeframes (buying up to 4 years ahead) to help risk manage price exposure. The price we pay is the price our customers pay for the energy component part of their bill.

The non-commodity aspects of bills such as regulated pass through costs (fees paid to other companies who operate and maintain the energy networks) are charged to each specific meter. They are charges associated with transportation and capacity cannot be influenced by our trading decisions or strategy.

Risk

The risk team provides CCS and external stakeholders with independent oversight of the trading team’s activities. This includes ensuring agreed strategies and risk limits to protect customer interests are adhered to. The team also provide constructive challenge to the trading team, if appropriate, and ensure CCS trading activities are benchmarked appropriately.

Trading tactics are reviewed at regular meetings and quarterly by customer representatives at an external governance panel, chaired by an independent market expert with many years of experience of the energy industry.

Data

The data team is responsible for ensuring accurate information on the CCS energy portfolio is maintained; processing site additions and terminations in a timely manner and reporting spend accurately. Accurate data is vital to ensure the right trading information and reporting capability for spend and consumption. As well as looking after your energy data, the team develops new systems, such as energy.gov, to help you manage your energy efficiently.

Liquid Fuel

The Liquid Fuel agreement is a collaborative procurement developed in conjunction with Scottish Procurement and the Ministry of Defence. Typically we undertake a further competition on your behalf before a call-off contract is awarded, however, you may carry out your own further competition if you prefer. If we run the further competition for you, once the call-off contract is awarded you can then order your fuel directly with the supplier, as required. Over 345 million litres of fuel are currently procured through the agreement annually, covering 5,500+ sites and 275+ customer organisations.

Development

The development team is focused on seeking initiatives to help customers reduce energy spend through goods and services that can help reduce energy consumption lowering bills for customers. Examples of the energy saving goods and services available include:

  • a demand side response scheme which provides access to national grid schemes providing a potential revenue stream and savings on energy costs
  • on-site generation such as solar and biomass to self-supply and reduce carbon footprint
  • automatic monitoring and targeting analysis looking at ways to change consumption patterns
  • efficient outside and street lighting to reduce energy spend for a necessary asset
  • energy savings performance contracts to provide fully funded energy conservation measures such as LED lighting and air conditioning that reduce consumption while providing a guarantee on energy savings

Advice and guidance

CCS can provide advice and guidance for government departments and public sector organisations on:

  • spend and demand reduction initiatives
  • efficient management of your energy portfolio
  • getting the most out of the agreements
  • budget forecasting

If you would like to review your energy portfolio with CCS to see if there are any initiatives you can take advantage of please get in touch.

You can also read case studies on some of the benefits our customer have enjoyed:

Gas

Electricity

You can also view a video about our trading team:

introduction to the energy team

Get in touch

For further advice and support please get in touch with our helpdesk:

Telephone 0345 410 2222

Email customer.acquisition@crowncommercial.gov.uk

Published 11 May 2015