The NHS is facing its tenth successive year of energy price rises, a trend that’s set to continue, as forecasts predict prices could rise by up to 45% by 2020 compared to 2016 rates.
As many Trusts are already striving to meet challenging targets within limited budgets, increasing energy bills can lead to resources being diverted away from frontline services. Mitigating rising energy costs is therefore crucial – and energy consultancy Inenco believes that the best way to do this is by reviewing their energy procurement strategy.
It’s a tried-and-tested approach - here’s how Inenco helped one NHS Trust achieve 8% savings on their energy bills.
Background
Like many NHS organisations, staying firmly in control of its energy budget was a top priority for this Trust, so it typically opted for fixed price contracts. But as it usually bought during the winter months, when prices are often at a premium, its annual energy spend was increasing.
When the Trust approached Inenco for procurement support, its annual energy spend had reached £800k. It wanted advice from Inenco’s procurement experts, because while it wanted to move away from fixed-price contracts, it also needed a low-risk approach to energy buying.
A bespoke approach
There were a range of flexible contracts available to the Trust, but Inenco’s Options solution gave it the unique opportunity to take a portfolio approach, spreading its volume across a range of different flexible purchasing strategies.
After working with the Trust to determine its appetite for risk, Inenco’s procurement experts developed an approach that was tailored to its requirements.
Each purchasing strategy has its own level of risk and budget certainty, and for this Trust, Inenco decided that a combination of both its Capped Forward buying strategy and its Trend strategy would be the best way forward. The capped strategy gave the Trust budget certainty, with a pre-agreed maximum price, while the flexible nature of both strategies enabled it to take advantage of falling markets.
Results
Through Options, Inenco gave the Trust the “best of both worlds” approach to energy buying that it was seeking. With its energy procurement split between the capped and trend strategies, it had the price certainty it needed. Unlike a fixed contract, however, the Trust could also benefit when wholesale energy prices fell – which has enabled it to reduce its energy spend by 8%.
Are your organisation’s energy bills rising? Inenco’s procurement team has unlocked savings for a number of NHS Trusts by optimising their procurement strategies – for more information, visit www.inenco.com/nhs-trusts
