An arm’s-length management organisation explains how it has made improvements to its electricity portfolio
Article written in partnership with:
Challenge: Support required to manage electricity portfolio
Solution: Services of Monarch Partnership procured
Outcome: Major savings on electricity costs
One could argue that electricity is the lifeblood that runs through buildings. Whether it is the kettle boiling or the shower being powered, it is a ubiquitous part of people’s homes.
But it can be an expensive commodity, and it is important to get the right price for it. Social landlords manage a huge portfolio of homes, so it is vital that they get the best deal – both for themselves and their tenants.
Electricity procurement, and energy procurement more generally, can be difficult to grasp without specialist knowledge of the area. As a result, many social landlords try to outsource this process to an external company.
This was the decision that arm’s-length management organisation (ALMO) Barnet Homes, which manages 15,000 homes, took when it came to deciding how its electricity portfolio should be procured and managed.
An unsatisfactory experience with a previous provider saw the ALMO go back out to the market to find a new supplier that could meet its needs. This was especially important because there were a number of challenges that the landlord needed help overcoming.
But finding the right organisation to partner with was about more than just cost, says Carol Connah, group procurement officer at Barnet Homes.
“We’ve done a lot of work in the past couple of years on electrical rising mains and I needed a company that would be proactive,” she says.
As a public sector organisation, Barnet Homes was obliged to find a new supplier through a procurement framework. Monarch Partnership was eventually appointed to buy electricity for the organisation in 2011 after a comprehensive tender process.
In 2014 there was a second tender for services after the contract ended, but this time through a different framework. It was at this point that Ms Connah and Barnet Homes decided they wanted to trial a different approach to electricity procurement.
Traditionally, when purchasing electricity, landlords are stuck with buying energy on rigid one to two-year price deals. However, this time, after discussions with Monarch Partnership, it was decided that the landlord would instead try flexible purchasing.
Flexible purchasing offers procurers the chance to take advantage of fluctuations in price in the energy market.
Ms Connah explains that the process allows you to buy electricity “like a commodity on the stock exchange”. You can buy six months’ worth or a year’s worth of tranches of electricity at a time. However, a portfolio of 500,000kwh usage is required to purchase through this block-buying method, she says.
She adds that electricity prices can “change in hours, not just days”, so it is incredibly important procurers continually keep an eye on prices to get the best deal.
“I was a bit sceptical to start with, but in the first year we made about £30,000 of savings.”
Carol Connah, group procurement officer, Barnet Homes
This is one area in which Monarch Partnership is providing much-needed support to Barnet Homes. The company provides Ms Connah with regular email updates. It will let her know immediately when prices have dropped below a set parameter, which helps inform her purchasing decisions.
“They will give you the market conditions and they will give you the reasons change has happened.
“You get a feel of why it is that price. Is it going to last? Or is it something that you have got to make a decision on quickly?”
Ms Connah says that taking a proactive approach to electricity procurement has resulted in impressive savings for Barnet Homes.
“I was a bit sceptical to start with, but in the first year we made about £30,000 of savings, which was really good. We have progressed ever since.”
It is not just electricity procurement, however; Monarch Partnership and Barnet Homes have also partnered on the smooth implementation of other key elements of the landlord’s electricity portfolio.
Back in 2014, Barnet Homes began a roll-out of 700 smart meters for communal areas across its properties to provide more accurate billing.
To ensure that any partner would give the organisation support to install these smart meters, Ms Connah included a requirement in the tender for suppliers to explain how they would assist with the installation of the meters.
“Monarch worked with us to make sure the engineer slots were booked, as well as doing the liaison with the company that supplied all the meters,” she said.
Although the smart meters are solely for communal areas, leaseholders that reside in Barnet Homes properties receive bills for communal energy usage. Previously, the landlord had been challenged by some of these leaseholders about the accuracy of their bills.
The new meters have helped ensure the landlord’s energy use was being read more accurately and therefore being billed as such. As a result, many of these leaseholders no longer lodge complaints about inaccuracy, Ms Connah says.
The third and final pillar of support that Monarch Partnership provides to Barnet Homes concerns the maintenance of electrical rising mains, which provide power to its buildings.
Responsibility for the upkeep of cables rests with the council itself, so it needs to ensure it is on top of any issues.
“It’s another area [for which] I needed somebody as a consultant that would manage that process, because it’s not simple, and make sure the right documentation was done,” Ms Connah says.
Legacy issues concerning the metering of the rising mains had become an acute issue by the time the two organisations started work together, but this is another area in which a close working relationship is paying dividends for the landlord.
“We have worked closely with Monarch and the electricity company in putting meters in each set of properties, so it is pulling the accurate billing,” Ms Connah concludes.