PowerShift Revolutionising Utilities Procurement for the Future

Briefly describe the initiative/ project/service; please include your aims and objectives

The project focused on aligning and procuring utilities contracts through collaboration with STAR partners (Rochdale, Trafford & Stockport Councils). The goal was to streamline processes, achieve cost efficiencies, and ensure compliance. 

Aims: 

– To foster effective collaboration among STAR partners and stakeholders 

– To secure favourable utility contracts through a coordinated approach 

– To enhance operational efficiency by standardising procurement processes 

– Improve energy procurement efficiency and decision making 

– Allow flexibility to add or remove sites as needed, ensuring adaptability to changing council strategies 

Objectives:

– To co-align all existing utility contracts

– To obtain energy experts to provide specialised knowledge and identify cost-saving opportunities

– Secure new supply contracts by December 2022 that incorporate flexible terms for adding and removing sites 

Relation to Transforming and Innovating Public Services Award

Streamlining Procurement Processes: 

By aligning and procuring flexible supply contracts, the project introduces more efficient, transparent, and cost-effective methods for managing utilities. This transformation reduces administrative burdens and reallocations resources to other public service priorities.

Collaboration as an Innovation Driver: 

The collaborative approach foster innovation by uniting stakeholders to share expertise, streamline decision making, and achieve mutual goals. It breaks silos and sets a precedent for cooperative public sector procurement.

Enhancing Adaptability and Responsiveness: 

Contracts with the flexibility to add or remove sites empower public services to adapt quickly to changing needs, such as new facilities, closures, carbon reduction schemes or streetlighting schemes (LED replacements/dimming strategies), without being locked into rigid terms. This adaptability supports sustainable, future ready public services.

Cost Optimisation for Better Public Outcomes: 

By agreeing financial caps, finance can set budgets and have budget certainty that energy costs can’t exceed the cap.

Leveraging Expertise for Smarter Decisions: 

Engaging energy experts ensures informed decision-making, reduces risks, and demonstrated a commitment to innovation, evidence-based practices in public sector operations. 

By focusing on collaboration, flexibility and efficiency this project exemplifies how public services can innovate to meet modern demands while delivering value and sustainability. 

What are the key achievements? 

Key Achievements

Establishment of a Hedging Strategy: 

A comprehensive hedging strategy (purchase within period) was successfully developed and implemented, executed by the equity energies team. This strategy has provided significant financial protection against volatile energy prices and market fluctuations. By strategically managing energy costs through hedging, we have ensured more predictable financial outcomes.

Implementation of Financial Caps: 

Financial caps were introduced as a critical component of the strategy, further enhancing budget predictability and providing an additional layer of protection against price spikes. This mechanism allowed for better control over energy expenditures and reduced financial risk for the local authorities.

Improved Forecasting Capabilities: 

The ability to re-forecast energy consumption was significantly enhanced. This was achieved through the flexibility of adding or removing sites (e.g. council buildings, schools) from the forecast and the integration of net carbon schemes (e.g. solar farms, streetlighting schemes). This capability has provided real-time, more accurate consumption forecasts, improved planning and hedging against actual usage.

Cost Avoidance of £8.6 Million: 

Over the first 12 months (April 2023 to March 2024), the hedging strategy, financial caps, and improved forecasting contributed to a substantial cost avoidance of £8.6 million. This is a direct result of proactive risk management, and the strategic adjustments made in response to changing market conditions.

Strategic Financial Planning: 

The initiative has resulted in more robust financial planning, aligning energy expenditure with business goals. By successfully managing energy price volatility, the project has contributed to a more stable financial environment, with the ability to quickly adapt to changes in energy consumption and market dynamics.

Sustainability and Efficiency Gains: 

Through the integration of net carbon schemes, (Rochdale – Solar Farm, Stockport – Streetlighing LED replacement scheme) the project not only achieved financial results but also supported sustainability goals. These schemes have contributed to reducing the carbon footprint while maintaining financial efficiency.

Dimming and Trimming Strategies: 

The hedging strategy and improved forecasting capabilities also supported the adoption of dimming and trimming strategies for streetlighting, further enhancing energy efficiency. These measures have led to significant reductions in energy consumption without compromising safety or service quality. 

These achievements underscore the success of the initiative in mitigating risks, optimising costs, and enhancing forecasting and planning capabilities. The £8.6 million in cost avoidance serves as a clear indication of the initiative’s substantial financial impact within the first year of operation. 

How Innovative is your initiative? 

This initiative represents a groundbreaking approach to energy procurement and sustainability, introducing creative solutions and meaningful change across local authorities.

Shift from Fixed-Price Contracts 

A comprehensive review revealed that fixed-price contracts lacked flexibility, imposing penalties for re-forecasting and hindering sustainability efforts like net carbon schemes. The project shifted to a more dynamic and adaptable energy procurement model, aligning with evolving needs and sustainability priorities.

Accelerated Response 

During the Energy Crisis The urgency of the energy crisis, marked by soaring prices and volatility, necessitated a fast-tracked timeline. A new procurement strategy was developed and agreed upon by December 2022, allowing a short purchasing window before contracts began. This swift response helped mitigate financial impacts during a critical period.

Delegated Decision-Making: 

A First for Local Authorities For the first time, delegated decision-making was secured from local authorities, enabling collective energy purchasing decisions. This groundbreaking step required extensive collaboration, negotiation, and trust-building among executives, ensuring alignment across Rochdale, Stockport, and Trafford councils.

Cross-Authority Collaboration 

By uniting multiple local authorities under a single procurement strategy, the project introduced a collective framework for energy management. This approach allowed knowledge sharing, cost savings, and a cohesive strategy, setting a precedent for future joint ventures in public sector energy procurement.

Pioneering Hedging Strategies and Financial Caps 

The adoption of a hedging strategy to manage energy price volatility marked a shift from reactive to proactive risk management. Financial caps added predictability and control, empowering local authorities to better manage energy costs and budget effectively despite market instability.

Dynamic Forecasting for Sustainability 

The initiative introduced flexible forecasting, enabling real-time adjustments for site changes and integrating net carbon schemes. This adaptability allowed local authorities to pursue sustainability projects previously constrained by rigid contracts, fostering innovation in energy management.

Cost Avoidance and Strategic Risk Management 

Through hedging, dynamic forecasting, and financial caps, the project avoided an estimated £8.6 million in costs within its first year. This proactive risk management approach provided immediate financial benefits and positioned local authorities for longterm sustainability.

Foundation for Future Sustainability Projects 

Beyond immediate benefits, the project created opportunities for future energy innovations, including energy-efficient streetlighting, dimming and trimming strategies, and solar farm developments. This foundation for sustainability stemmed from the financial stability and flexibility introduced through the initiative. 

Conclusion 

This initiative redefined public sector energy management by combining innovative financial strategies, sustainability, and collaborative governance. By challenging traditional methods, achieving unprecedented delegated authority, and establishing dynamic systems, it created a model for adaptability and forward-thinking energy solutions. Its success during the energy crisis and the implementation of a collective procurement framework exemplify how public sector initiatives can push boundaries and deliver long-term value. 

What are the key learning points? 

The journey through this innovative energy procurement initiative has yielded valuable insights from challenges overcome and successes achieved. Below are the main lessons, replicability, and scalability of the initiative, and how these lessons can be applied to similar projects.

Collaboration and Stakeholder Engagement 

Obtaining delegated decision-making from multiple local authorities was unprecedented and required extensive consultation, clear communication, and trust-building among executives and senior officers. Early and transparent stakeholder engagement proved critical for alignment and collective decision-making. Key Lesson: Transparent communication and early trust-building are essential for successful collaboration, particularly in diverse or multi-authority environments.

Flexibility in Unpredictable Environments 

A flexible energy procurement strategy with dynamic forecasting and adjustments was crucial during the energy crisis. Fixedprice contracts were no longer viable, and adaptability became a major strength. Key Lesson: Incorporate flexibility into strategies to ensure resilience and quick responses to unforeseen challenges, especially in fast-evolving sectors like energy.

Financial Innovation for Risk Management 

Hedging strategies and financial caps helped mitigate the impact of rising energy prices, providing greater budget predictability. This proactive approach to risk management was new but invaluable. Key Lesson: Financial tools like hedging and caps are critical in volatile markets. They improve risk management, cost control, and long-term financial stability.

Streamlined Procurement for Efficiency 

Centralising procurement across local authorities reduced administrative burdens, improved efficiency, and simplified decisionmaking. While this didn’t lower energy prices, it expedited processes and reduced complexity. Key Lesson: Streamlining procurement across organisations enhances efficiency, reduces overhead, and simplifies workflows, offering a model for reducing bureaucratic inefficiencies.

Scalable and Replicable Systems 

The forecasting, contract management, and financial strategies developed were scalable and adaptable across multiple local authorities. As the initiative expanded, its framework supported growth without sacrificing effectiveness. Key Lesson: Scalable and flexible frameworks can be adopted by other organisations, particularly in the public sector, ensuring adaptability and growth without compromising outcomes.

Sustainability and Cost Efficiency 

Integrating sustainability initiatives like net-zero carbon schemes required financial flexibility. The hedging strategy provided the confidence to pursue these goals without compromising cost-efficiency. Key Lesson: Financial planning and sustainability can coexist. Aligning cost savings with environmental objectives creates long-term value.

Proactive Risk Management 

Shifting to proactive risk management using hedging and caps protected local authorities from energy price volatility and improved budgeting and forecasting. Key Lesson: Proactive risk management is vital for mitigating risks, enabling better planning, and ensuring stability in uncertain markets.

Speed and Agility in Crisis 

During the energy crisis, fast-tracking approvals and decision-making through delegated authority allowed for timely strategy implementation. 

Key Lesson: Agility and streamlined decision-making processes are critical during crises. They enable rapid responses to external pressures and ensure organisational resilience.

Replicability and Scalability 

This initiative demonstrates a model that can be replicated and scaled across other local authorities, councils, and private organisations. Core elements—centralised procurement, flexible forecasting, dynamic financial management, and sustainability focus—are adaptable to diverse contexts. Public bodies, in particular, can leverage these strategies to enhance energy procurement, reduce costs, and integrate sustainability initiatives. 

Conclusion 

This initiative has highlighted the importance of collaboration, flexibility, and innovation. By centralising procurement, adopting financial strategies, and prioritising sustainability, Rochdale, Stockport, and Trafford councils are positioned for long-term success. The project offers a replicable blueprint for cost savings and sustainable practices, benefiting public and private sectors alike. 

Additional Comments 

STAR Procurement is now made up of six local authorities (Rochdale, Stockport, Trafford, Tameside, St Helens and Knowsley) and work is ongoing to co-align all six current utilities contracts to end March 2028. This will allow procurement of a five-year strategy similar to this one, ensuring long-term benefits and continued collaboration across the authorities.