For example, we reduce power purchase prices for some of our clients further. Our OTR/ Agency Trading service can make use of the OTR (Over-the-counter Trade Registration) market. The OTR market gives the user ‘de facto entry’ into OTC market and hence direct access to wholesale prices. The net savings here can be significant. Forthwith a client could effectively purchase energy volumes off any if the accredited energy merchants ware selling power in the spot or forward OTC markets. The end-user can trade ‘directly’ with each of the OTC merchants ‘as if’ the end-user has a signed counter-party agreement (or Grid Trading Master Agreements – GTMAs) in place with the OTC merchant, indeed all of them, all the OTC merchants who are registered members of the power exchange in question, be it Nord Pool N2EX or APX.
The trading volume is executed and cleared by exchange, which reduces the end-user’s trading and administration costs. But – crucially – the OTR platform gives the user ‘de facto’ access to the entirety of the OTC market: all the merchants who are members of the power exchange. The end-user can then buy from whichever merchant is offering energy at the lowest price. Enabling the end-user to buy at wholesale prices but also at a wholesale price which is the lowest OTC price theoretically available every time. Thus reducing long-term energy costs for the client, and at no new commercial risk and at a known net cost.
Even large electro-intensive users (or other accredited traders themselves with GTMAs in place) could benefit from the Agency Trading service as the OTR platform will significantly increase the number of other GTMA merchants the can trade with. Because typically, even a large, electricity trading electro-intensive user will only have signed a limited number of GTMAs and therefore only a limited number of OTC energy merchants he can commercially contract with, directly or through an inter-dealer broker.
In short, having access to the entirety of the OTC market gives the end-user ‘virtual access’ to the widest range merchants and so the widest range of bid – offer price pairs possible; and thus be able to transact at the more favourable OTC electricity prices each time, whether they are buying or selling. This Agency Trading alternative should also be more efficient. Because this ‘virtual route’ to the OTC market (via the OTR) may be easier and cheaper than the alternative physical trading route, including the administration cost of signing and managing individual GTMAs with every one of the (70 or so) actively counter-parties in the OTC trading market.
The cost savings on each trade may be ‘small’ perhaps £ 0.05/MWh in reduced bid-offer spread in each case. However, small price improvements on very large volumes, which are regularly transacted could sum up to a substantial energy cost saving for the purchasing company over time. The OTR is a fairly simple and reduced risk trading platform to use in practice. The OTR Agency Service which Mainline Energy advises on (or will provide as appointed Trading Agent) avoids the client many of the legal, clearing, trading, operations and many other administration costs associated with an ‘actual electricity’ operation i.e. one which requires the end-user register volumes and to sign up to trading agreements in their own name.