www.nepoportal.org

Stockton BC Corporate and Social Inclusion Select Committee

Ian Taylor

NEPO Director

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NEPO

The North East Procurement Organisation (NEPO) was established in 1976 as a professional buying organisation to aggregate demand, lead on joint contracting and pool purchasing knowledge and expertise.

NEPO is governed by a Joint Committee comprising of members from the 12 North East Local Authorities.

NEPO has recently expanded its remit to deliver collaborative procurement in all major areas of external expenditure including Social Care and Construction.

NEPO have developed leading edge category management processes and commissioned category management training across the region.

NEPO’s objectives are to undertake Collaborative Procurement to:

Save money

Develop competitive regional suppliers

Enhance procurement capability

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NEPO Energy Procurement NEPO has been responsible for procuring the early 1990’s. Specialist resource dedicated to managing energy. NEPO are able to access contract options that would be unavailable to

individual customers. The contracts aggregate volumes to provide flexible, risk-managed energy

procurement with robust contract management, performance and service levels.

NEPO’s Gas and Electricity contracts are Pan Government approved.

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NEPO Energy Procurement

Gas Contract commenced April 2011 Annual volumes 30M Therms (Stockton 2.8M) Annual value £26.9m (Stockton £2.5M) Current supplier Corona

Electricity Contract commenced April 2009 Annual volume 546Gwh (Stockton 33 Gwh) Annual Value £49m (Stockton £3M) Current supplier Npower

Also a range of ancillary contracts such as Meter Operator and Automatic Meter Reading.

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NEPO Energy Customer Breakdown

Cestria Community Housing

City Of Newcastle

City Of Sunderland College

Cleveland Fire Brigade

Cleveland P olice

Darlington Borough Council

Derwentside Homes

Durham Constabulary

East Durham Homes

Gateshead College

Gateshead MBC

Hartlepool Borough Council

Hartlepool College

Housing Hartlepool

Middlesbrough College

Middlesbrough Council

Tyne Metroploitan College (North Tyneside College)

North Tyneside Council

Northumbria P olice

Redcar & Cleveland

Sedgefield Borough Homes

Sunderland City Council

Northumberland County Council

Durham County Council

Stockton

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Electricity Price Breakdown

NEPO Breakdown of Electricity Cost 2012

Energy58%Management Fee

2%

Dloss5%

DUoS19%

TUoS4%

Feed in Tariff2%

Renewables Obligation6%

BSUoS2%

Imbalance1%

Tloss1%

Energy

BSUoS

Tloss

Imbalance

Renewables Obligation

Management Fee

Dloss

DUoS

TUoS

Feed in Tariff

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Electricity Market

Japanese Tsunami

Electricity Baseload Prices over the last 7 years

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Flexible Energy Procurement It is almost impossible to obtain best price in a single contracting

decision. Traditional fixed price contracts gives 1 in 250 chance of getting it right.

Flexible procurement allows multiple buying decisions to enable optimisation of the purchasing portfolio in an unpredictable market. Gives access to all markets and flexibility on when and how much energy is purchased.

NEPO utilise live trading screens, a wealth of market data, and forecasts to support the energy trading and buying decisions.

Direct access to traders within the suppliers.

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Fixed Price ContractFixed Price

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Flexible PurchasingFlexible Purchasing - Purchase within Period

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Buying and Risk Management NEPO have developed a Risk and Purchasing Strategy. NEPO Energy Risk Committee which is made up of representatives from

finance, procurement and energy management. The group meet monthly and agree the tactical execution of the strategy.

The Energy Risk Committee report into the Regional Resource Directors. Range of systems and tools to manage the purchasing of energy.

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Savings Savings against the market Gas & Electricity 09/10 £13.7M (Stockton £883k) 10/11 £10.6M (Stockton £664K) 11/12 1.8M (Stockton £120k)

Saving Against Agreed Budget Electricity Only 09/10 £1.4M (Stockton £94k) 10/11 £79k (Stockton £5k) 11/12 £637K (Stockton £40K)

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Benefits for Members Dedicated specialist regional resource. NEPO lead on procurement process. Support members with the exit and implementation of contracts. Manage contracts ensuring service levels are met, provide escalation and

resolution for more complex issues and develop supplier relationships. Act as a source of expertise and conduit to members ton ensure they are

fully informed of market developments and best practise is shared. Represent the region at a national level. Members benefit from economies of scale.

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Future Developments Energy NEPO are currently exploring working with GPS to develop a solution for

longer term buying from sustainable sources. This would further spread the risk of buying by directly contracting with

generators across time periods from 5-25 years. This will lock in prices during periods of uncertainty. NEPO will look to engage regionally to encourage generators to bid for this contract.

The current contracts allow purchasing directly from generators to be “Sleeved” in against the current contract. This can be from contracts entered into on behalf of a single authorities or a wider initiative as detailed above.

NEPO are also developing a collective buying strategy for the wider community and are currently engaging with several organisations to develop this solution.