Energy has traditionally been traded in large quantities for a fixed period of time. Before deregulation, most electricity transactions were between generators and utilities or very large users. Price volatility was not a major issue, and price certainty, especially for utilities was of paramount importance. As the energy market was gradually deregulated, the size of transactions became much smaller and the end user could purchase directly from generators. Nevertheless, the practice of locking 100% of energy prices for a long period of time still prevails. Suppliers and generators prefer to fix the price for as long as possible as it guarantees them profits and customers for that period of time.
The problem is that in a highly volatile market these traditional systems of purchasing energy are tantamount to gambling. The system of fixing energy prices for a year or longer is nothing more than betting the market price on the lock-in date will be to your advantage. Chances of the fixed price being the optimum for the contract period are 1 in 250.
Buying energy at the market index: “riding” the market prices is dangerous, as prices can rise drastically in a very short period of time and budgeting becomes impossible due to the frequent high volatility in price.
Prospect Resources’ flexible, responsive, and customized strategic purchase plan puts control into your hands, allowing you to do what the other systems don’t do – take advantage of price movements and adjust plans based on market conditions. It provides a great deal of certainty and stability and results in substantial cost savings.