As one of the co-founders of Pure Planet, part of my role is to run the team which buys our Members’ energy.
We’ve one simple, variable tariff, as you know. Our aim is that you’ll never pay more for your energy than the price we pay for it on your behalf. Simply, you pay what we pay for the energy you use. Our Members’ rate is based on wholesale prices and includes just the additional network and subsidy costs all energy consumers have to pay, with zero markup.
We buy your energy in advance. This is called ‘hedging’. Hedging energy works a bit like changing your holiday money in advance. The exchange rate will still move after you’ve bought your Euros or Dollars, but you get certainty about how much you have and how much it cost.
But with energy, it’s more complex - so we blend the cost of your energy by buying bits of it at various points. Simply, we don’t buy all of your energy at one fixed price, we blend - or hedge - over time.
This means that if we forecast you are going to use ten units of power or gas on one day, six months from now, in July say, we might buy six of those units now; another two units in three months' time; and the last two units a month out.
Then, on the day before, we look at the most accurate forecast we have for your usage on that day and make any small, final adjustments to get as close to your actual usage as possible .
All of these wholesale purchases will be at different rates. Our aim is that we secure your energy well in advance and at the best prices, given prevailing market conditions. And hedging is as much of an art as it is a science, because wholesale prices are bouncing around all of the time.
Thankfully, we have some clever people helping work this all out, plus the support of BP our investor and trading partner.
Every quarter we publish a blog post about what’s going on in the wholesale energy market.
Last year wholesale energy prices rose significantly, caused by a sustained demand for gas.
I thought it would helpful to our Members to answer any questions you may have about how the wholesale energy market works, how we buy in advance, and what causes prices to rise or fall.
Our community manager
I’m looking forward to seeing your questions!