CEP Procurement Strategies & Contract Management 2

Question 1

A company wants to hedge against price volatility while retaining upside potential. Which procurement structure best achieves this?

Accepted Answer

Index-based contract with a price cap

Answer

An index-based contract with a price cap limits downside risk while allowing the buyer to benefit if market prices fall below the cap.

Question 2

What does 'basis risk' specifically refer to in energy procurement?

Accepted Answer

The difference in price between the delivery point and the pricing hub

Answer

Basis risk is the price differential between a regional delivery point and the benchmark trading hub (e.g., ERCOT North vs. Henry Hub).

Question 3

In a Request for Proposal (RFP) for electricity supply, which element is MOST critical to include to enable apples-to-apples supplier comparison?

Accepted Answer

Standardized load data and a common pricing template

Answer

Standardized load data and a uniform pricing template ensure all suppliers bid on identical terms, enabling direct price comparison.

Question 4

Which contract term allows an energy buyer to exit a fixed-price agreement early if market prices drop significantly?

Accepted Answer

Termination for convenience provision

Answer

A termination for convenience clause allows the buyer to exit the contract, typically subject to an early termination fee.

Question 5

A manufacturer with highly seasonal energy demand should prioritize which contract feature?

Accepted Answer

A swing or tolerance band allowing volume variation

Answer

A swing or tolerance band permits the buyer to take more or less energy than the contracted volume within defined limits, accommodating seasonal variation.

(CEP) Certified Energy Procurement Professional Practice Test

(CEP) Certified Energy Procurement Professional Practice Test

CEP Procurement Strategies & Contract Management 2