Risk Management
If your supply arrangements do, or could have some exposure to spot prices, then they will be subject to change and will require your vigilance.
In this case you may choose to arrange your energy supply by either:
- purchasing at spot price and then “hedge” the spot pricing risks with a mixture of electricity “hedging” contracts, or
- choosing a supply arrangement that gives you a fixed price for most of your supply but with a varying price for the residual.
In either case you will need to pay careful attention to risk management. What happens when the spot price rises? Do you know how much extra this could cost you? How much do you think you stand to gain by taking this risk?
Energy Link (and sister company Ellsoft) are the only two adviser/brokers authorised by the Securities Commission to assist and advise you with your hedging arrangements.
Common hedging mistakes include:
- Being completely exposed to the spot price in order to save money in the long run
- Not understanding how to adjust your hedge cover for price differences across the transmission grid
- Not knowing how to evaluate the price of an offered hedge
We recommend, where practicable, a ‘portfolio approach’ to hedging which over the long term gives low energy costs with minimal rate shock and low volatility. This approach takes into account the technical factors inherent in the electricity market and also the timing, term and prices of hedge contracts.
Simply better business.