Identify the locations where we can procure their supply immediately and then start with the largest exposure. Begin PRF process with analyzing historical usage patterns, then identify the product that meets the institutional needs and risk tolerance of client, then monitor current, historical, and expected market conditions to maximize buying opportunities.
Tishman Speyer partnered with Transparent Energy to develop a strategy and procure electricity for The Rockefeller Plaza locations in October of 2015.
Following a review of the location’s previous contract strategies, Transparent Energy recommended a hedging strategy approach, allowing for the ability to monitor the market and remove future price volatility risks as opportunities presented themselves:
- In October of 2015, savings existed for the location, however it did not meet or exceed the established portfolio goals in order to recommend a fixed price strategy
- The best suited strategy would be a variable product requiring ongoing marketing monitoring, allowing for flexibility of pricing to absorb market risk
- A managed product would be most effective in fulfilling Tishman Speyer’s requirement to maximize savings
Transparent Energy developed a hedge strategy for Tishman Speyer that would allow them to take advantage of positive downward market moves and minimize their exposure to volatility. An RFP/Auction process was facilitated to secure the best price for a fixed adder portion of the price (this stabilized each component of the price except the raw commodity or energy costs).
ConEdison Zone J electricity pricing began to decline in June of 2015, but plateaued in July. The TE team kept an eye on the trend to ensure Tishman Speyer took advantage of the opportunity that presented itself in early December 2015. The recommended strategy was to lock in only the On-Peak usage at a fixed price, as prices for Off-Peak usage were not trading at a price conducive to hedging. Shortly after the hedge was completed, the market began to turn upwards.
On December 15, 2015, Tishman executed a 12-month fixed price hedge for electricity to extend through the calendar year 2016.
- Market prices receded by more than 23% from January 2015 to the hedge date, which was less than 1% above the all-time low for the price of energy for 2016 in ConEd Zone J
- Additional savings were realized by patient monitoring of the market and seizing the opportunity for a more favorable market price: More than $30,000/year
- Additional costs were avoided by not hedging the Off-Peak usage: More than $30,000/year