AEE CEP common mistakes
AEE CEP · Understand the traps and how to avoid them.
Builds a power price forecast by multiplying a single annual gas price by one heat rate, then applies that result to a winter-peaking load.
Candidates memorize the heat-rate formula but treat it as a constant, so they miss seasonal unit commitment, shaped gas forwards, and the effect of load shape on the marginal unit.
What to do instead
Build monthly or hourly dispatch: use shaped gas forwards, unit-specific seasonal heat rates, and the customer load profile. Show the resulting cost stack before comparing offers.
Compares a gas quote in $/Dth with an index in $/MMBtu, or compares an all-in delivered electricity price with an energy-only price, without normalizing units and boundaries.
Under time pressure, candidates do arithmetic on the numbers as written and assume unit and boundary labels are interchangeable.
What to do instead
Write a one-line conversion and boundary table first: units, heating value basis, delivery point, and included components. Convert every bid to the same $/MWh delivered basis before ranking.
Launches an RFP before documenting the load profile, risk mandate, and evaluation weights, then selects the lowest headline price.
The procurement calendar drives the process, and templates from prior deals are reused without checking whether the sourcing method fits volume, term, credit, and market liquidity.
What to do instead
Complete a sourcing decision matrix first: volume certainty, term, index preference, credit support, supplier count, and weighted criteria. Only then choose RFP, reverse auction, or bilateral negotiation.
Accepts supplier-specific bid templates with different index definitions, delivery points, and pass-through lists, then ranks bids as if they were comparable.
Suppliers submit their own forms, and candidates focus on the price line rather than the definitions behind it.
What to do instead
Issue a mandatory bid form with fixed rows: energy, capacity, transmission, ancillaries, renewable obligations, index and delivery point, escalation, and pass-through caps. Reject or normalize nonconforming bids in writing.
Signs a supply agreement containing automatic renewal and a supplier right to change price on notice, while spending negotiation time only on the energy rate.
Price is the visible variable, so term, renewal, and unilateral change clauses are skimmed as boilerplate.
What to do instead
Negotiate a clause checklist in order: term, notice windows, renewal, price-change limits, termination for convenience, change in law, and volume tolerance. Redline nonstandard renewal and change clauses before price is finalized.
Leaves volume-risk allocation, imbalance responsibility, and balancing charges undefined while negotiating the per-MWh price first.
Candidates treat price as the main negotiation and assume volume and balancing details will be resolved later or are standard.
What to do instead
Sequence the negotiation: risk allocation, then shape and volume tolerance, then price. Document who bears imbalance, forecasting error, and balancing charges, and quantify each in the bid comparison.
Hedges 100% of forecast load, including uncommitted growth and accounts likely to attrit, creating an overhedged position.
Fear of price spikes drives a full-cover instinct, and the forecast is treated as certain rather than probabilistic.
What to do instead
Use a layered hedging policy with percentage bands by tenor and a tolerance range around forecast. Stress-test overhedge cost if volume falls 10-20%, and include a resale or termination mechanism.
Treats a fixed-price supply contract as eliminating price risk and ignores supplier credit, collateral calls, and mark-to-market termination exposure.
A fixed price feels risk-free, so counterparty and contract mechanics are not modeled.
What to do instead
Assess supplier credit, collateral thresholds, and termination value under a price-shock scenario. Compare fixed-price, block-and-index, and partial-hedge structures on total risk, not just rate certainty.
Budgets only the energy component and omits capacity, transmission, ancillaries, renewable portfolio obligations, and taxes that flow through separately.
The commodity charge dominates attention, and regulated pass-throughs are assumed to be included or immaterial.
What to do instead
Build a full delivered-cost stack with each regulated and policy component listed separately, its escalation basis, and its pass-through mechanism. Reconcile the stack to prior invoices before approval.
Claims renewable or zero-carbon status from unbundled RECs in the location-based inventory, or reports only the market-based number without instrument quality checks.
Candidates conflate renewable procurement with emissions accounting and overlook scope 2 dual-reporting rules and instrument eligibility.
What to do instead
Apply dual reporting: location-based and market-based scope 2. Verify REC vintage, market boundary, and eligibility, and disclose instrument quality. Separate procurement claims from verified emissions reductions.