First Milk Home

While First Milk Direct’s electricity deal can save members thousands of pounds on their energy bills, we continue to look at ways of saving members even more money on their utilities.

First Milk Direct’s next step forward is wholesale purchasing. And the best part of this deal, is that members who already have a First Milk Direct electricity deal, need do nothing more than sign a form and then sit back and wait for even more savings, possibly up to another 15%.

So what does wholesale purchasing mean and how can it benefit you? Here we’ve posed some questions to Jed Bird at Inenco, First Milk Direct’s partner, in this scheme.

What is Wholesale Purchasing for electricity procurement?

Electricity is like a commodity, and its price varies on many different factors including the weather, politics and world events.
Wholesale Purchasing attempts to buy when prices are low which therefore reduces the need to buy when energy prices are high. Not everyone can access the wholesale market but because of the very large volume which Inenco procures on behalf of the customer base, we are able to access the wholesale market.

Don’t we do that now?

No. The traditional way is to go to the market on a given day and buy at the prevailing market price.

How do we know when prices will be low?

We don’t. Just as we don’t know when share prices, or raw material prices, or quota prices will be at their low, or their high.

So how do we pick the right time to buy?

Ever heard of Pound Cost Averaging, when it comes to investing? If you have £1000 to iinvest in shares or milk quota you obviously want to invest this when the market is at its lowest as you get more for your money.

However, only the very lucky can take that £1000 and pick the bottom of the market. It’s much less risky to invest £100 over 10 months, so spreading the risk.

Wholesale Purchasing effectively does the same for electricity purchase – buying it over a much longer period of time prior to its “delivery” to the customer. The final price of the electricity is then the average of all the trades that were made over the trading period.

For example, if we were to buy your energy in two equally weighted blocks, the first at £16.30 per mega Watt hour and the second at £15.50 per mWh: the final price of the energy would be £15.90.

What are the benefits?

• Less risk
• Easier to plan, and to buy in market dips and avoid the peaks
• Bulk purchasing
• Reduced supplier administration costs
• Pre-agreed supplier performance levels financial penalties for under-performance

Who does all this then?

Inenco’s team of ‘Energy Traders’ who watch the wholesale energy markets on a daily basis just like farmers watch the quota market. Their expertise, combined with their use of various statistical forecasting models, helps predict fluctuations. The art is to find dips and pick the optimal time to purchase energy.

British Gas Business is the ultimate supplier for all members throughout the country. It is Inenco’s instruction as to when to buy and in what amounts. As Inenco is not a licensed supplier, we need to utilise a supplier to buy from the wholesale market.

Will it make a difference to the price if more members join?

The important thing to remember is that the more members who sign up, then the cheaper the electricity should be for everyone.

And the sooner the better. This is to allow the maximum window of opportunity for Inenco to take advantage of potential dips in the market and secure the best possible prices. All that is required is to sign a form allowing us to purchase your energy requirement from the wholesale market.

How much do we save?

In the year to September 2008 (yes, we’ve bought up until then already) we estimate we have saved our customers an average of 15% on the previous year’s rates. That’s 15% on top of the savings you are already making being part of First Milk Direct.

How does a member calculate exactly how much he could save?

You don’t have to. We know farmers are inundated with paperwork as it is, so we’ll do the hard work for you. Simply call the First Milk helpline at Inenco and we’ll tell you what you need to do next.

Don’t I have to give notice to my existing supplier and won’t I have to pay an exit penalty?

Each supplier has a different notice period and is it important that this is done at the right time. When you call us, we can talk you through the process that’s relevant to you.

Who do I ring for more information?

Ring the First Milk helpline at Inenco on 0845 454 0191 and we’ll be happy to help.