Procurement - supply of natural gas framework: buyer guide SP-23-03

How to use the framework

Pricing

The total billing rate for each site is built up from a number of elements: the wholesale cost of natural gas, a variety of pass-through costs (distribution, UK Government levies and a supplier management fee).

The supplier’s management fees make up a small per-cent of the total cost. The rest of a bill is made up of wholesale and pass-through costs.

Scottish Procurement purchase the wholesale gas on the futures markets up to two-and-a-half years in advance. This flexible trading strategy smooths-out the peaks and troughs of market fluctuations while avoiding payment of the ‘risk-premium’ which would be applied to fixed rate tariffs. Flexible purchasing is popular in the public sector as it improves budget predictability, through a fixed cost of gas, which is reconciled on an annual basis.

A Risk Management Committee (RMC) dictates how much wholesale gas must be bought in advance, and how much must be bought closer to the point of consumption. This is the ‘risk management strategy’. The RMC consists of experts from energy management, finance and procurement functions from across the Scottish public sector. They meet once a quarter to receive market updates, to scrutinise Scottish Procurement’s purchase decisions, and to consider whether or not the risk management strategy remains fit for purpose.

Pass-through costs are set by market regulators and the UK government and as such, neither Scottish Procurement nor the supplier of natural gas is able to influence them.

Scottish Procurement issue a quarterly Price Risk Guidance which includes current and forecasted average rates by meter type.

Detailed site specific billing rates are sent to all customers by TotalEnergies Gas & Power within one month of the start of each contract year.

How to sign up to the supply of natural gas framework

To join the Supply of Natural Gas Framework, the first step is to complete an Agency Agreement. This Agreement allows Scottish Procurement to sign a supply agreement with TotalEnergies Gas & Power Ltd on your behalf.  The Agency Agreement also covers the supply of Electricity.