Procuring Energy in a Deregulated Marketplace

When the option exists for a business to purchase electricity outside of the regulated utility, many businesses have taken advantage of the first opportunity to improve their supply – utilizing a bidding process with multiple full service suppliers to achieve a more competitive cost. Often, these businesses have also achieved a second advantage by gaining pricing certainty by entering into fixed-priced contracts over a multiple year time frame.

This is just the tip of the iceberg. A variety of additional opportunities exist that are available to the savvy business by exploiting some or all of the nodes of the electricity supply chain, rather than viewing electricity as simply a commodity provided by a full service supplier.

The Electricity Supply Chain

The supply chain for electricity includes the generation itself including the commodity used to fuel the generation, as well as a variety of ancillary services required to maintain reliability, and retail operations necessary to meet a customer’s specific energy demand. Additionally there is the transmission and distribution of energy that continues to be provided by the regulated utility.

The complexity of the electricity market differs from all other commodity markets in that electricity cannot be stored and therefore requires coordinated processes to manage the balancing of supply and demand. This contributes to dramatic pricing volatility and seasonality.

Disaggregating the supply chain for electricity and examining the cost drivers and inefficiencies of each node provides further visibility into the potential opportunities. The objective is to maximize efficiency, minimize or eliminate mark-ups, and provide transparency in the transactions, without incurring unacceptable volatility in the commodity markets.

Three Rivers Energy, Inc. specializes in creating and managing these types of opportunities for our business customers. Inside the “black box” of the electricity supply chain is a series of processes and transactions, often provided by a variety of entities. Pricing provided by a full-service supplier consists of an aggregation of their costs and a variety of mark-ups. Three Rivers Energy is able to disaggregate the supply chain, utilize the wholesale energy market and provide our clients with a custom solution with optimized counterparties and lower mark-ups due to our lower overhead structure.