Restructuring of electricity and gas contracts to control costs
New Zealand’s most iconic sporting facility is a big energy consumer, with catering companies and sports associations among the tenants it serves. And that’s before you even factor in the cost of switching on those massive floodlights.
Working with Energy Select (the procurement brand operating under the Smart Power umbrella), Eden Park Trust was able to restructure its electricity and gas contracts to control costs during a time of steeply rising energy prices. Here’s how.
Urgency plus complexity equals risk.
Eden Park Trust was already working with Smart Power to manage tenant billing. In late 2019, the Trust received notification from its energy supplier that the contract was due to renew. A new schedule of charges was attached.
The problem from the Trust’s point of view was that it was impossible to tell whether the deal was a good one. With a decision imminent, CFO Brett Winstanley asked us to take a closer look.
“Energy Select recommended a review of all the different types of contracts we had, to get a holistic view,” Brett says. “As well as separate gas and energy bills, we have contracts for Time Of Use (TOU) and Non Half Hour (NHH) connections. It’s a bit complicated, and that was the problem.”
We suggested putting all the contracts out for tender rather than simply rolling over the current arrangements. This made the business more attractive to energy suppliers. Energy Select managed the process and handled negotiations – but that was only half the job.
Competition and complication.
The Trust received 12 proposals from energy providers, each one offering a different combination of terms, rates, prices and options. In other words, it was impossible to compare apples with apples. Expert analysis was required.
“We got Energy Select to distil all the proposals into a report our team could use to make a decision,” says Brett Winstanley. “It’s an extremely complicated market, and companies need expert guidance to avoid expensive mistakes. We needed to understand what was going on in the market and which contracts would work best for all parts of our business.”
“It was about translating all the data and relating it to a complex environment, so we could make the most informed decision.”
A win for Eden Park.
The comprehensive report we created enabled Eden Park Trust to confidently select three new energy suppliers.
One goal of the exercise was to ensure the Trust obtained the best terms for its electricity and gas connections, so it wouldn’t be blindsided if market conditions changed one or two years down the track. As Brett Winstanley says, price is only part of the story. You need to know whether you’ll be stuck with an unsuitable arrangement because of a lack of understanding when the contract was signed.
“We got an outcome that suited our circumstances and a deal we were comfortable with,” he says. “It gives you confidence to know that you’re dealing with people who understand why prices are where they are – and can explain the market forces driving them.”