Independent healthcare providers: mitigating commercial risk when managing energy costs

Healthcare providers, with substantial and complex energy requirements, have faced particular and well-documented challenges in recent months. Massive increases in energy costs continue to be experienced across the economy, amid messaging from central Government that energy should not be sourced from particular providers as a result of the war in Ukraine. ESG objectives, and the particular focus on achieving net zero within tight timescales, have also created a drive towards renewable sources of power.

In seeking to ensure best value in sourcing the most competitive energy supplies, providers should avoid some common pitfalls:

• Energy brokers: providers may be approached by brokers, pro-actively offering to identify improved commercial terms. Care should be taken in appointing brokers, to ensure that there is no conflict with continuity of provision; brokers’ standard terms, which may be submitted to staff for e-signature, may include authority for the brokers to terminate existing arrangements. Depending on the wording, this may also enable brokers to source contracts entitling them to substantial commissions from new providers. Before appointing energy brokers, providers should check their existing provision to establish their entitlement to terminate. Any terms proposed by brokers should be reviewed carefully to check their scope of authority. Before signing new contracts with replacement providers, providers should be clear on whether brokers will receive commission, and whether the new arrangements being proposed represent the best available pricing.   
• Transition arrangements: before terminating a contract with existing providers, providers should check the scope of the old and new contracts to establish which locations are included. Care should be taken to ensure that there is no risk of an outgoing provider raising objections to transfer; this could delay the transfer and, at worst, create an exposure to costs arising from a move onto a higher “Deemed Contract” rate. 

Bevan Brittan’s teams are highly experienced in supporting healthcare providers in handling complex supply chain management and energy projects, from contracting and mobilisation to dispute resolution. Please contact Daniel Purcell or Laura Brealey to discuss how we can help you.