London Energy Project

With a total annual energy bill of around £300 million across London authorities, and increasingly unstable prices within the energy industry, London boroughs have been working together to challenge the market and deliver significant savings for all involved.

Currently in its fourth year, the London Energy Project has looked at ways of identifying and implementing best practice in energy procurement.

How the project began

It began in 2005 after energy markets, stable for many years, started to become volatile. For a long time, local authorities used fixed price, fixed-term contracts to procure energy but this modus operandi became unsuitable in these conditions because councils were unable to take advantage of any price fluctuations and, as a result, were paying over the odds for their energy consumption.

Rising prices

After seeing price increases in 2005 of around five per cent, head of procurement at the London borough of Haringey, Michael Wood, began to feel that London councils' energy buying strategies needed an overhaul.

"There was only one way in which local authorities were buying energy" he explains. "The suppliers knew when we would make our fixed-term purchases and could manipulate the prices accordingly. We were hostage to fortune. I began to think can't we do anything better than this?"

In 2006, with funding from London Councils, Haringey led a review to explore how London boroughs procured their energy and considered what could be done to improve energy buying strategies.

The findings formed the basis of an action plan which aimed to promote best practice across local government.

Councils are now encouraged to aggregate their energy needs and work collaboratively by using regional purchasing bodies for their energy procurement, thus enabling them to increase their purchasing clout and access the wholesale energy markets where prices are lower.

Professional public sector buying organisations can also provide the necessary expertise to help navigate the complexities of the energy markets, freeing up energy managers to focus on improving energy management rather than getting bogged down in procurement.