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Energy Business
Rafael Herzberg
Rafael Herzberg
Expert Member
Top Contributor
 · Posted in Energy Business

Case 3: Special gain in the Brazilian free power market

Case 3: Special gain in the Brazilian free power market

A large multinational pharmaceutical company hired me to help reduce electricity costs.

Two actions were taken with great success.

1st) Migration to the free market and

2nd) Inclusion in the free contract of a "collar" price clause for a portion of the volume.

The migration to the free market followed the widely known procedure! It resulted in a 35% saving on the electricity bill. The inclusion of the "collar" provided an "extra" saving.

The client really liked the suggestion I made, to allocate a portion of the contracted volume to the "collar" price. A "floor" price in $/MWh and a "ceiling" price in $/MWh were negotiated. The price invoiced by the power trading company was then: if the PLD ("spot" as published by the Brazilian power clearing house) price was below the "floor", it would be the floor. If it was above the "ceiling", it would be the ceiling. Between the floor and the ceiling, it would be the PLD.

As the PLD remained low during this period (as I have predicted for the client), payments for this volume linked to the "collar" were well below the closed fixed price, thus generating additional savings.