Energy Supply Procurement

Luthin Associates has provided Energy Consulting Services for electric, fossil fuels (natural gas and fuel oil) and steam since 1994, and we can offer an unparalleled wealth of experience across deregulated energy markets. We currently manage and procure energy for clients who have a total energy portfolio spend in excess of $700 million dollars per year. The size of our procurement portfolio provides us with strong purchasing power and an ability to negotiate very favorable contract terms for our customer base.

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At Luthin Associates, we practice a multipronged, five-step approach in developing a Customized Lifecycle Energy Procurement Strategy (CLEPS). The initial step in the procurement process will be to understand your risk tolerance and budget objectives, followed by a comprehensive load analysis. A variety of hedging options will be discussed and presented to the decision makers, taking into account market timing and established client goals. This ensures management-buy-in on the appropriate hedging strategy. We provide clients with an array of effective alternative solutions to exceed your energy management goals. We actively monitor your account, continuously assess risk factors, and capture savings. We have detailed on the next page the means and methods employed utilizing our proprietary CLEPS model.

Develop a Risk Strategy – Luthin Associates facilitates Fixed Price contracts, Indexed products, and active management “portfolio” approaches to energy spend management based on the risk tolerance of individual clients. We will work with you to develop a hedging strategy.

Procurement Customized Life-cycle Energy Procurement Strategy

Our core competencies lie in our ability to properly analyze market data and evaluate Energy Supply Company (ESCO) products.  We regularly conduct historical market analysis and future market projections for our clientele who, being faced with ever-increasing power and fossil fuel prices, wish to understand market trends, supply options, costs and risks.

We constantly monitor markets and update our models with current market prices and also maintain historical data to facilitate the development of trend lines, “look-back” analysis and “what if” scenarios. We have developed hourly cost models which are necessary to understand the cost impact of Hourly Pricing models for large customers.  We have live feeds to the NYMEX which ensures complete transparency as well as avoids any premium that may be placed by the gas supplier at the time of execution.

We use a variety of forecasting techniques to determine energy market trends which enable our clients to make informed energy purchasing decisions.  Our analysis methodology is summarized as follows: Trend Analysis, Historical Market Data Analysis, Futures curves, Correlations (ex. fossil fuels to power generation, etc.), Lifetime Averages, Technical Analysis (Fibonacci support levels, Bollinger bands etc.), Production Levels, Interstate Capacity Availability, Seasonality & Weather, Fossil Fuel Storage Levels, Geo-Political Realities.

Perform Load Analysis – Using historical load data and profiles, Luthin Associates can model a variety of supply product options such as shaped block-and-index, Around the Clock (ATC) Blocks as well as Fixed Pricing for the electric accounts. Additionally, we can monitor the performance of the purchase strategy against established metrics. The competitive electric purchase Request for Proposal (RFP) will include bid terms designed to capitalize on current market conditions.

Market Transparency  – We obtain real-time price signals from both the NYISO and NYMEX to help us in our competitive purchasing decisions for customers. This transparency allows us to model active management products which are index based. Our active management approach involves staggered strategic buying of energy blocks at opportune levels to dollar cost average. These buying decisions are influenced by an in-depth study of market prices along with technical and fundamental analysis.

Scenario simulations will be developed showing the Value at Risk (VAR) and decisions will be based on addressing budgetary concerns as well as seasonal concerns namely, insulating against a polar vortex type situation. Our knowledge of regulatory matters also allows us to capture any new changes in law or tariff related components that may impact pricing. All hedges will be based on continual monitoring of the market to determine an advantageous time to enter into a supply agreement. These conditions include:

  • Favorable natural gas and fuel oil prices with regard to historical pricing data/storage levels and market sentiment.
  • Meet budgetary objectives and risk tolerance levels
  • Consensus among energy trading professionals as to favorable timing
  • Luthin Associates proprietary opinion

Thereafter, using historical load data and profiles, Luthin Associates will solicit bids for natural gas and fuel oil supply. The bids requested will be for multiple terms and supply product options. The competitive purchase RFP will include bid terms designed to capitalize on current market conditions.

Negotiation of Supply Contracts – We will identify areas where our clients may achieve immediate results by effectively negotiating contracts. Given the large assets we manage, we have significant negotiating power with the ESCOs and are able to incorporate terms and conditions that will benefit you. We aggressively negotiate balancing pools, swing adders, arbitrage opportunities and weather adjustments into contracts to ensure our customers can take advantage of market opportunities if they arise.