In 2015, a paper products company was nearing the finalization of a 3-year electricity agreement with a provider based on the urgent recommendation from the energy broker that the market was soon to rise. However, hidden fees and commission interests drove the broker’s advice, not actual market intelligence.
Transparent Energy Procurement
Under Legend’s Markets Advisory Service, the customer instead had access to complete transparency in pricing for all of their negotiations. Our experts indicated that the market would actually go down and were able to reprice the deal with a transparent margin, subsequently reducing the total cost by $600,000 over 3 years.
With the power contract secured and $600,000 in cost reduction on the electricity supply contract locked in, Legend then turned to natural gas management to help the customer renegotiate their natural gas transportation agreement. The structure of the contract negotiated by the previous broker was disadvantageous due to the nature of managing volumes over and under contract volumes in that zone. Legend renegotiated the contract terms to better align with the market. After securing a deal with better terms and conditions Legend began active nominations and balancing services for natural gas to help the customer take advantage of fluctuations in the market based on their ability to fuel switch.
When a cold snap in January occurred, Legend helped liquidate gas back into the market based on the better terms and netted over $1,200,000 in a single week when gas prices spiked. Additionally, when the supplier tried to keep some of the liquidation value Legend helped enforce the terms of the contract to make sure the customer received 100% of the funds owed.
Active Energy Management
Following the successes in energy procurement, Legend then turned to peak load management to help the facility reduce transmission and capacity related charges. Legend helped do a detailed analysis of the opportunity costs of reducing or shutting down production during peak periods of demand on the power grid. This analysis involved evaluating several different alternative methods for capacity management including customer owned or partner owned onsite generation, battery storage, and equipment curtailment. The analysis showed a net savings opportunity of more than $2,000,000 annually if Legend’s Grid Peak Management service was utilized. This service is provided in parallel to the daily budgets giving real-time visibility into daily distribution utility peak forecasts based on Legend’s proprietary models. Through active peak load management, the customer was able to curtail power usage during both the local distribution utility and the RTO’s peak intervals, locking in savings for the entire following year. The net savings of this project were $2,100,000 with minimal overall operational strain on the business.
Next, Legend engaged with the customer on the regulatory front. With non-energy regulatory costs increasing dramatically in their state, Legend tracked potential changes and has worked with the customer to negotiate and reduce certain components on the regulated side of their electric and gas bills that reduced their costs by approximately $850,000 annually.
Complementary energy analytics
In addition to active real-time market management and strategic risk consulting Legend began active reporting daily. Every day the client receives an updated report showing the previous day’s electricity and natural gas consumption, along with production cost metrics based on the previous day’s energy pricing and the facility’s daily production numbers. This insight into daily budgeting helps the management team drive down cost, energy intensity, and help adjust quarterly budget forecasts.
Our active energy procurement strategy saved the client $600,000 over 3 years and allowed us to capitalize on opportunities only possible with an active energy management strategy. We secured $1,000,000 in net revenue from active natural gas nominations and balancing and our Grid Peak Management service resulted in net savings of $2,100,000 with minimal overall operational strain on the business.