Electric and Gas Procurement
What the exam expects
Procurement questions test contract structures, risk allocation, and cost components. For electricity, know fixed all-in pricing, fixed energy with pass-through charges, block-and-index, index pricing, hedges, capacity tags, renewable energy credits, and retail choice. For natural gas, understand NYMEX Henry Hub, basis, transportation, storage, balancing, and firm versus interruptible service. A fixed price transfers commodity risk but may exclude transmission, capacity, taxes, and supplier fees. Index pricing exposes the buyer to spot and basis risk but can capture lower market prices.
Traps
A common trap is comparing a fixed all-in offer with an index energy-only quote. Another is ignoring basis risk, volume tolerance, weather normalization, or contract termination provisions. Do not assume a low commodity price means a low delivered cost.
Worked example
A fixed offer is $0.065/kWh. An index offer is projected at $0.055/kWh plus a $0.008/kWh basis adder and $0.004/kWh supplier fee, totaling $0.067/kWh. The fixed offer is $0.002/kWh cheaper on the stated assumptions. For gas, if NYMEX is $2.50/MMBtu, basis is $0.30/MMBtu, and transport is $0.20/MMBtu, delivered gas is $3.00/MMBtu, or $0.30/therm.