Publication reference: PRN00900

To:

• Trust and foundation trust chief executive officers (CEOs)
• Trust and foundation trust procurement leads
• Trust and foundation trust estate leads

cc. •

• Integrate care board (ICB) CEOs
• ICB finance directors
• ICB estate leads
• ICB procurement leads
• Regional directors

Dear colleagues,

Transitioning to centralised energy purchasing to find efficiencies for the NHS

Finding efficiencies is a priority for the NHS. We have a responsibility to our patients and to the British taxpayer to ensure value for money for every pound spent.

As one of the biggest commercial organisations in the country, buying on behalf of the fifth biggest employer in the world, the NHS has a huge amount of collective buying power.

We identified energy as a highly commoditised area where, through an alternative and centralised purchasing strategy, the NHS can achieve greater value for money and find efficiencies for reinvestment into frontline services and patient care.

A central review identified that there are currently 200 energy contracts in place across trusts in England, under different agreements, with varying value and purchasing strategies. Given this, NHS England has agreed, in partnership with Crown Commercial Service (CCS), to develop an NHS specific energy agreement under the CCS framework – Supply of Energy 2. We estimate that transitioning to a centralised energy purchasing agreement has the potential to save between £60-£100 million per year for the NHS.

Details of the purchasing strategy

NHS England has worked with CCS to shape an energy product specifically for the NHS. The NHS basket will shape our energy buying strategy.  This NHS unique basket contains four key service offers:

1. A long-term, risk-based buying strategy which will allow the NHS to work as one to harness the greatest value, energy security and green energy
2. Additional energy management support for every ICS
3. A comprehensive bill validation service aimed at ensuring the NHS has been historically charged the correct amount for energy
4. A full energy bureau service aimed at freeing up time for local energy managers to focus on efficiency projects, by validating and processing energy bills.

At this stage this package is only available to trusts, but once the agreement is in place, we will consider extending the energy basket to other health organisations if possible.

This agreement will not be mandated but NHS England strongly recommends that all NHS trusts enter into the central agreement. This will support the NHS to leverage its purchasing power and benefit from purchasing at scale. The more the NHS comes together, the greater the benefits across the system. 

Bringing energy together as a national contract allows us to provide additional benefits to all NHS trusts including:

• Greater price stability and resilience to external events
• Increased budget predictability
• Bulk discounts based on consumption volume commitment
• Funding to support improved energy management equating to £3 million per annum for the NHS, for the next 3 years
• Greater visibility of energy usage to enable targeting of support to manage areas of inefficiency
• Alignment to best practice energy purchasing, which is already followed by central government and many NHS trusts.

The benefits of this central contract help ensure we are securing the best energy prices for the NHS through our buying strategy and the wider benefits associated with the basket, like volume discount, which will mitigate price increases. 

This agreement has targets to support the aim to move to 100% renewable energy. There are also wider conversations on Power Purchase Agreements (PPAs) to reduce our energy bill.

This arrangement will standardise the approach to energy procurement including REGOs across all trusts. NHS England is aware of the cost pressures of REGO and the potential for regulatory change by Ofgem and DESNZ and looks to disincentivise greenwashing.  A workstream will use data including market trading information to make a decision on REGO ahead of the NHS England basket delivery period i.e. April 2025.  The outcome of this exercise will influence the NHS England policy position on REGO and will be overseen by the NHS Commodity Trading Governance Board.

Next steps and key actions

If a trust is an existing CCS NHS customer, they will automatically benefit from the new energy basket. CCS will contact its current customers to advise on next steps and outline how contracts will be transferred to this agreement. All existing CCS contracts will move to this new agreement between January and March 2024.

For trusts who are not with CCS, we want to understand when your energy contracts are coming to an end. NHS England have carried out a data collection and gathered contract information from several trusts. For those that have not yet responded, we will be following up over the coming weeks. Once we understand contract end dates across the NHS, NHS England and CCS will work with trusts to move current contracts across to CCS, if they chose to do so.

Directors of estates should contact england.energy@nhs.net with your contract end date to arrange transition to the new contract. At this stage we ask that you do not enter into any new energy agreements without speaking to the NHS England Energy team. 

Many organisations have an energy manager. As part of the CCS support for these arrangements all ICS will have energy management support provided to them. If you are a trust without an energy manager you will benefit from dedicated ICS energy management and support. If you are a trust with an energy manager already in place, you will still benefit from the energy management agreement with CCS via your ICS.

Representatives from all trusts will be invited to attend a webinar via MS Teams on 11 January 2024. During these sessions, NHS England commercial estates, and CCS energy leads will discuss:

• The NHS England and CCS agreement
• The NHS basket
• Benefits, including savings
• Onboarding support.

We ask that there is attendance from the director of estates and head of procurement from your trust at the webinar. This session will allow time for questions.

Please direct any further questions to England.energy@nhs.net.

Thank you for your support and engagement with this process. I look forward to collectively delivering further commercial efficiencies for the NHS. 

Yours sincerely,

Jacqui Rock, Chief Commercial Officer, NHS England