Energy Consumption

126  Energy prices have been volatile over the last three decades and Local Authorities are left with a series of choices as to how to manage the risk associated with variations in energy prices during the contract period.  Each of these options has different strengths and weaknesses, and Best Value considerations.  These need to be carefully considered before determining the most appropriate option.

127  The Model Payment Mechanism does not include provisions for the Service Provider to give a consumption forecast or for the payment of utility costs but in some PFI projects the private sector takes consumption risk and the public sector takes price risk.  Bidders can be requested to price on the basis it takes all or some consumption risk and/or provide an energy consumption forecast for all or some of the Contract Period.  This is a complex issue and the Local Authority will need to consult with it's advisers.

128  The Model Contract does not include any provisions relating to the sharing of risk in relation to the consumption and cost of the utilities.  This will need to be incorporated on a project specific basis.