Power Active gives businesses the same visibility over prices as a fixed-rate contract but offers something entirely new – the ability to move to a lower price if the market drops. Businesses pay a monthly price that is delivered by multiplying an agreed contract rate from ASX Energy futures by its Price Efficiency Factor (PEF) plus the standard markup.
Power Active delivers for Victorian business
In early 2018, a Victorian business began to explore its energy contracting options as it neared the end of its old fixed-rate contract. Whether or not it was going to market at the right time for the best price, was an important factor for the business.
The business knew that prices could drop or increase and therefore, needed a contract with flexibility that would eliminate this risk, something no fixed-rate contract the business was offered did.
So, they reached out to Flow Power. Making the decision to sign onto Power Active, with the added Active Option, gave the business the flexibility it needed.
Prices began to fall as the second year of the business’s contract (FY20) approached. The business wouldn’t have been able to unlock value from this shift on a fixed-rate offer. Luckily, it had chosen Power Active and the Active Option, which allowed it to move to a lower price for FY20 and FY21.
Choosing the Active Option, delivered savings of 14% and 13% on its energy prices for FY20 and FY21 respectively. Had it opted for a traditional fixed-rate contract, the business wouldn’t have had this opportunity for savings.
Things to take away
The energy market is rapidly changing and the time is ripe for businesses to begin to reshape how they use power. Solutions like Power Active give businesses the opportunity to adapt and get ahead of the market.
Power Active allows businesses to unlock value from their energy agreements and find new opportunities in how they use power.
Is there a risk with buying wholesale?
There’s no more of a risk in buying wholesale than there is retail, as retail contracts are influenced entirely by the wholesale market.
What’s the maximum term for Power Active?
Currently, three to four years, however it can be looked at on a case by case basis should businesses wish to look at longer terms.
Is Power Active the same as an Average rate option (ARO)?
The ARO is about capping the average price of the spot market. In Power Active, the spot market is not considered in the billing process other than through the PEF calculations.
For the consumer it is very much a standard contract, a load following contract, not a volume-based contract.
Could it be classed as a financial derivative?
It is not a derivative product and therefore there’s no requirement to enter into any financial contracts.
In a few years will onsite solar photovoltaic (PV), the generation of solar energy on business facilities, possibly make my PEF worse?
It is feasible that onsite PV could worsen the PEF. The market is ever-evolving and as new technologies like batteries come into play, it will lessen that risk.
As these new changes occur in the market, our goal is to make it easier for customers to access these new technologies as they become available.
Can you contract part of your load to Power Active?
Ultimately, we take the load from one National Metering Identifier (NMI), so part of loads cannot be contracted to Power Active. However, businesses with multiple NMI’s can certainly contract some of their load on Power Active.
What if I can’t change my operations?
Implementing Power Active into your business does not require any physical change to the way in which a business uses energy, rather it is an opportunity for businesses to improve its outcomes.
If the price falls, do I pay the active option premium?
Given we’re risk managing it, and have likely purchased derivatives to cover the exposure, that premium is still payable for any of the active option periods.
Can we send you a request for quote as per a standard agent tender to a ‘traditional’ retailer?
Yes, Power Active is suitable for everyone. We can assist any consultant through the process about how to best understand and analyse the outcomes of the product.
If I increase or decrease load, how does this affect the rate I pay?
Similar to traditional retail contracts, if you reduce the amount of consumption in peak or off-peak time, you would simply pay less than you would because your cents per kilowatt hour effectively should remain the same. The outcome would mean you have consumed less kilowatt hours in that period, therefore your costs for that period would be lower.
However, this changes with the way you consume power. If you were to consume less and in a different way, then you improve your price efficiency factor. If you’re using power in exactly the same way, but you’re simply using less of it, the only change would be a reduction in costs through the less kilowatt hours that you’ve used.