CEP Procurement Strategies & Contract Management 4

Question 1

What is the main disadvantage of a 'block and index' energy contract structure?

Accepted Answer

The indexed portion exposes the buyer to market price fluctuations

Answer

While the block portion is priced at a fixed rate, the indexed component means total cost varies with market conditions.

Question 2

Which factor most directly affects a buyer's negotiating leverage when procuring energy from retail suppliers?

Accepted Answer

The buyer's load size, credit quality, and contract term flexibility

Answer

Large, creditworthy buyers with flexible terms are more attractive to suppliers, generating more competitive bids and better pricing.

Question 3

A 'heat rate contract' for electricity is structured so that the price of power is tied to:

Accepted Answer

The price of natural gas multiplied by a fixed heat rate factor

Answer

Heat rate contracts link electricity prices to natural gas prices using a conversion factor (heat rate), mimicking the economics of a gas-fired peaker plant.

Question 4

When is it most advantageous for a buyer to use a broker versus going directly to suppliers in an energy RFP?

Accepted Answer

When the buyer lacks market access, resources, or expertise to manage the RFP process

Answer

Brokers add most value when buyers lack procurement infrastructure, market intelligence, or supplier relationships to run a competitive process themselves.

Question 5

What does 'swing' or 'tolerance' in a natural gas supply contract typically allow?

Accepted Answer

The buyer to take a percentage above or below the nominated daily volume

Answer

Swing provisions give the buyer operational flexibility to take more or less gas than the base nomination, within agreed percentage limits.

(CEP) Certified Energy Procurement Professional Practice Test

(CEP) Certified Energy Procurement Professional Practice Test

CEP Procurement Strategies & Contract Management 4