Over the past year, the industry has (rightly) been focusing on increasing non-commodity charges; exploring ways to mitigate the growing risk and where possible turn it into value-generating opportunities via demand response schemes. However, it’s critical we do not neglect the commodity element of the bill. Commodity costs still make up more than 45% of the bill and with the smallest market movement can impact your exposed cost exponentially.
The message to businesses is clear: ensure that your risk management strategy is up to date and that you are hedged in accordance with it.
To keep abreast of market movement, it’s possible to set an upper and lower tolerance, often called ‘warning orders’, so that you are alerted when a price decision may need to be made. Changing economic conditions (such as the falling Pound after Brexit, or increasing market prices) may mean that your tolerances need reviewing to reflect your latest budget.
As with every aspect of business, knowledge is power. There is a plethora of market information out there and it’s important to make use of it. Be sure to stay on top of market changes so that you can understand the forces at play and give yourself a better chance of foreseeing issues and reacting to changes quickly, from a properly informed position