Gain Competitive Advantage:
Strategic Energy Procurement

As corporate cost containment efforts intensify, energy expenditures are gaining attention.

There are factors which present both great risks and great opportunities in the energy procurement area:

  • Price Volatility — frequent and extreme price movements
  • Deregulation of Energy — presenting a myriad of flexible purchasing options.
  • New Technologies — reducing energy consumption, or generate and store electricity.

Managing price risk is the new corporate mantra, and with a customized, long-term, strategic energy procurement plan, corporations no longer have to be price-takers. They can take control of expenditures and reduce overall energy costs, making them more manageable, stable and predictable.

With clear corporate strategy objectives, a customized energy purchasing strategy can be developed for each facility, based on its location, particular usage patterns and physical structure.

During the past decade, Prospect Resources’ clients have benefited from its proprietary tools for analysis, development, and execution of a customized energy purchasing strategy, achieving an average of 16% savings on energy costs.

By actively developing and executing a detailed, strategic energy procurement plan, corporations can take control of their expenditures, making energy costs more manageable and predictable.

Engage PRI to develop, manage, and execute your energy strategy.


Layered Hedging Strategy

Layered Hedging refers to the strategy of:

Strategic Layered Hedging is predicated on the belief that in an unpredictable market, the best approach is to make purchases of small amounts of energy over time (Dollar-cost averaging), which limits exposure to the highs and capitalizes on the lows, mitigates risks, reduces volatility, and increases budget certainty. It takes advantage of the numerous purchasing options available, provides the flexibility needed to leverage market volatility, and can be customized for each location. It requires daily market involvement, and sophisticated software to identify market opportunities and manage the multiple hedges for each client.

Layered Hedging is a dynamic strategy and can take many forms. Layers can be hedged not only for annual periods, but also on a monthly basis. Layers can be hedged on a Peak vs. Off-peak model. The options are many, all determined by the account size, usage and demand patterns, and client preference.

Annual Layered Hedging

Layered Hedging mitigates risks, reduces volatility, increases budget certainty and stability, and reduces energy expenditures.
Engage PRI to develop, manage, and execute your energy strategy.


Choose from a Myriad of Energy Purchasing Options

There are many options for purchasing energy. The pros and cons of each option must be examined thoroughly before developing a detailed energy purchasing plan. Here are some factors to consider before choosing a strategy:

  • What percent should be hedged initially? …in subsequent hedges?
  • What are the parameters that will trigger additional hedges?
  • Should the same strategy be employed for both natural gas and electricity?
  • Should electricity hedging be done on regular kW blocks, or on load-following blocks?
  • Which non-energy components should be hedged, and under what conditions?
  • Should the same strategy be employed across facilities in multiple states, or should there be local and regional differences?
  • There are many ways to hedge, and an ideal strategy may include several types of layers (strips), as each one provides unique benefits. Here are some examples of possible hedging layers (strips):
    • Strips based on % of usage throughout the entire year
    • Strips based on % of usage for specific months only
    • Strips of On-Peak and Off-Peak vs. Around-the-Clock usage

Prospect Resources utilizes its proprietary analytic tools to craft and execute an effective and flexible strategy which mitigates risks, reduces volatility, increases budget certainty and stability and significantly reduces overall energy expenditures.

Buying 100% of your energy needs at once is a risky and capricious bet on a particular price and day. Such a bet eliminates your flexibility to take advantage of future market opportunities. Based on the last 10 years of market analysis, it is a very costly proposition.

If all that you get from your broker is fixed prices for 12, 24, or 36 months, … you’re being given incomplete information and coming out shortchanged!
Engage PRI to develop, manage, and execute your energy strategy.


Case Studies

Rental Property Gas Savings

How PRI’s Proven Approach to Energy Procurement Resulted in $1.3 Million in Savings for this Rental Properties Manager

Loyola University of Chicago

PRI and Loyola University of Chicago

New Client Success –Realty Group

Natural Gas and Electricity Savings – Realty Group

Crisis Management – Natural Gas

How PRI is changing the Game and Saved Illinois Clients $3,000,000