In the wrong hands, flexible energy purchasing can simply be unmanaged risk with a more impressive name.
Over recent months, engaging with different market participants, it has become apparent that some TPIs have encouraged traditionally fixed-price customers to adopt flexible purchasing strategies—without necessarily having the experience, capability or governance to manage the risk accepted.
Moving away from fixed pricing can be the right decision. But opening a position is easy. Managing it when the market moves against you is where the real skill lies.
With Winter gas displaying many ingredients associated with a perfect storm—or even a short squeeze—it appears some customers may, under the guise of “good advice”, have leapt from one fire into another.
Having watched this year’s situation develop, you can see the trap hope has created for some buyers.
At the beginning of the conflict in the Middle East, it was understandable to hope peace might not be far away. The rational assumption was that neither side would benefit from prolonged escalation.
Unfortunately, markets do not have to follow our version of rationality.
This is a classic case study in why energy markets are difficult to predict. They are global, interconnected and exposed to geopolitical events, macroeconomic conditions, physical supply constraints, weather, infrastructure availability and market positioning.
Trying to navigate that complexity using gut feel—or our own version of common sense—ignores one uncomfortable truth:
The market does not care about you, your budget or what you hope will happen next. Hope is not a risk-management strategy.
Over the years, I have consistently seen the strongest outcomes come from strategies that remove, or significantly dampen, emotion from decision-making.
That does not mean every trade will feel comfortable. Good governance will sometimes require you to execute a decision when every instinct says to wait for something better.
But while disciplined strategies can create short-term unease, they rarely produce dissatisfaction with the final outcome.
Managing energy risk is a specialist skill. It requires market competence, empirical learning, mature governance, clear accountability and confidence in execution.
A flexible contract without those things is not really a strategy.
It is an exposure.
If your business has moved from fixed pricing to flexible purchasing—or currently has some open Winter position—it may be worth asking:
Do we have a genuine risk-management strategy, or are we merely waiting and hoping?
If you would value an independent review of your current position, purchasing framework or decision-making process, please message me. I am always happy to have an honest conversation—particularly before the market makes the decision on your behalf.
#EnergyProcurement#EnergyRiskManagement#UKBusinessEnergy#EnergyMarkets#FlexibleProcurement