The value of energy management when closing a facility

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Summit Energy Converts Penalty into Payout for Building Products Manufacturer

When one of the largest building products manufacturers in North America decided to shut down one of its facilities, it appeared as though the company would have to pay the utility $4,400 for outstanding energy contracts. However, when Summit Energy researched the case, it turned out that the utility owed the manufacturer, not the other way around.

Market Volatility Requires Dynamic Energy Strategy: In today’s tumultuous global economy, production requirements can shift quickly, causing some companies to close sites unexpectedly. When this happens, companies often find that they are obligated to volumes of contracted, and unused, energy. Understanding the site’s purchasing history in relation to the changing market enables companies to avoid unnecessary losses during liquidation.

SITUATION
One of the largest building product manufacturers in North America needed to shut down one of its sites in Pennsylvania. Since the site would close in the middle of the calendar year, the company’s strategic energy partner, Summit Energy, requested a liquidation quote from the utility for the balance of the site’s contracted volumes. The utility indicated that the manufacturer would owe approximately $4,400 at the time of liquidation. Summit believed the amount to be excessive given market conditions.

LEADERSHIP
Summit’s expert team researched the manufacturer’s purchasing history and confirmed that the site had contracted for the energy at a relatively low market price. Since the site closing would occur at a time when Northeast basis pricing was rising, the product would actually be more valuable at the time of liquidation than when it was originally purchased. Under these circumstances, Summit concluded that the manufacturer should receive a credit from the utility rather than pay for the contracted volume.

RESULTS
At Summit’s request, the utility verified the basis price and reconsidered its position on the liquidation penalty. The utility agreed that the manufacturer should receive a $4,400 payout as opposed to paying a liquidation penalty. Due to Summit’s market intelligence and diligence, there was an $8,800 swing in the manufacturer’s favor.

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