Portfolio contracts vs. fixed-price contracts for industry: how to choose the right strategy
Industrial companies with high consumption volumes often face the choice between portfolio management and traditional fixed-price contracts. Here are the crucial differences for your operation.
Two philosophies – not two products
Fixed-price and portfolio contracts are not just different pricing models – they are based on different views on risk. The fixed-price contract locks your risk to the supplier. The portfolio contract allows you to personally control how and when hedging takes place.
When fixed-price contracts work for industry
- Production is stable and predictable over the contract term
- You want a simple budget and do not want to manage market decisions on an ongoing basis
- The market is low, and you want to lock in the current level
When portfolio contracts work better
- The volume is large enough (>2 GWh/year) to justify the management fee
- You have the patience to make ongoing hedging decisions (or delegate them in writing)
- You want to be able to act on sudden price drops instead of being locked in
Three questions before you switch
- What is the supplier's mark-up in öre/MWh? Ask for the answer in writing.
- How are hedging decisions documented? Mandates must be in writing.
- How often are position and results reported? Monthly is the minimum.
Would you like a personal review?
This guide is free knowledge from Savera and is intended to give you concrete things to check on your own. We are an independent advisor in corporate electricity – if you would like us to look specifically at your contracts, invoices, or consumption, you are welcome to book a free initial consultation.
Tip: Never ask the supplier to “calculate for you” regarding their own proposal. Ask for raw data and let an independent party do the calculations.