Giles Hankinson, CEO of Utility Aid talks us through why your voluntary organisation’s energy buying strategy should focus on managing risk.
When energy markets are unpredictable, choosing the right contract isn’t about trying to predict the future. It’s about understanding your organisation’s appetite for risk and making informed decisions that protect your budgets.
At Utility Aid, we work with more than 4,500 charities and not-for-profit organisations. One thing we’ve learnt is that energy procurement works best when decisions are based on long-term resilience rather than short-term market predictions.
THE CURRENT PICTURE
Energy markets remain influenced by a range of global economic and geopolitical factors. While no one can say with certainty what will happen over the next few years, uncertainty continues to play a significant role in pricing.
As a result, many organisations are asking whether a one, two or three year contract is the right choice. There isn’t a single answer that suits everyone, but the decision should be based on risk management rather than assumptions about where prices may move.
It’s natural to hope prices will fall in the future. However, choosing a shorter contract solely because you expect lower prices is ultimately a prediction rather than a certainty.
We’ve seen organisations benefit from locking in prices early, and we’ve also seen others face significantly higher costs when markets moved against expectations. The reality is that no broker, supplier or customer can consistently predict future wholesale energy prices.
Instead of asking, ‘Will prices come down?’, a more useful question is: ‘How much financial risk is our organisation prepared to accept if they don’t?’
QUESTIONS FOR YOUR BOARD TO CONSIDER
Before deciding on the length of your next contract, it may be helpful to discuss:
- What level of financial risk are we comfortable taking?
- How would higher energy costs affect our organisation, services or beneficiaries?
- Would greater budget certainty help us plan more effectively over the coming years?
These conversations help ensure the decision reflects the organisation’s overall financial strategy rather than focusing solely on the possibility of future price movements.
UNDERSTANDING TODAY’S MARKET
While it’s impossible to predict future energy prices, it’s worth recognising that markets continue to be influenced by factors including:
- International conflicts and geopolitical tensions.
- Global energy supply and demand.
- Government policy and regulation.
- Infrastructure resilience and security.
- Wider economic conditions.
These are all factors that can contribute to price volatility over the lifetime of an energy contract.
IF BUDGET CERTAINTY IS YOUR PRIORITY
For organisations that have a low appetite for financial risk, fully fixed contracts can provide greater certainty over future energy costs. Not all ‘fixed’ contracts offer the same level of protection. Currently, only a small number of supplier products are considered fully fixed throughout the contract term, including:
- SSE – Protect
- EDF – Peace of Mind
- Drax – Fix for Good
If you’re considering a fixed-price contract, it’s worth asking your broker or supplier to explain exactly what is fixed, what isn’t, and whether any additional costs could be applied during the contract.
THE BOTTOM LINE
There is no perfect time to buy energy, and no one can predict the market with complete confidence.
The most effective procurement decisions are usually those that balance price with risk, support long-term financial planning and align with your organisation’s overall objectives.
By taking the time to understand your appetite for risk and exploring the options available, your organisation can make an informed decision that supports both financial stability and the services you deliver.
GET IN TOUCH
Utility Aid has been helping charities and not-for-profit organisations manage their energy procurement for nearly 25 years. If you’d like to discuss your options, our team is here to help. Visit utility-aid.co.uk or call 0808 1788 170.
THANK YOU FOR YOUR SUPPORT
A big diolch / thank you to Utility Aid who kindly sponsored our recent gofod3 event, once again partnering with WCVA to help voluntary organisations with all energy-related matters. Find out more about Utility Aid are supporting WCVA Partners.