In the previous parts of our series on electricity pricing, we highlighted two important points. First, that the price of electricity is not a single number, but a dynamic process over time; and second, that operational performance is determined not only by how much energy we generate or consume, but primarily by when it happens and how closely the actual outcome aligns with the plan. And this brings us to a topic that is often unpleasant but essential for many operations: deviation.
For many companies, this is a word that sounds complicated, technical, and a bit intimidating. In reality, however, it is a very simple principle. Deviation represents the difference between the planned and actual course of traded production or consumption. It is a natural consequence of the fact that the plan is created in advance, while reality unfolds over time. This difference often determines whether the operation is making a profit or needlessly losing money.
Deviation is a natural consequence of how the energy sector operates
Right from the start, it’s important to mention a key point. Deviation in and of itself does not mean an error or a technological failure. A heating plant may be well-designed. An industrial facility may have modern production processes. The staff may do their jobs diligently. And yet, a deviation will occur. Why? Because reality changes throughout the day.
In the morning, you prepare a plan for tomorrow. You rely on the weather forecast, expected electricity, heat, or cooling consumption, and how individual technologies will perform. But these inputs can change significantly during the day—the weather may develop differently than expected, consumer behavior may shift—typically on holidays or weekends—or an unplanned outage or other technical intervention may occur. That is when the deviation begins to arise. It does not arise because the plan was poorly designed, but because there is a time lag between its creation and actual operations. This lag is even greater when operations are planned on a monthly or annual basis. By the time energy is actually generated or consumed, the plan and reality almost always differ, at least to some extent. This leads to a fundamental conclusion: the goal is not to eliminate the deviation, but to keep it under control.
When a Deviation Becomes a Problem
Deviations are practically always present. The real problem arises when the difference between the plan and reality is significant and occurs at an inopportune time. Setting aside forward trading and fine-tuning in intraday continuous trading, every trader determines a day in advance how they will generate or consume electricity. This plan then becomes part of the overall balance of the power system. In the Czech Republic, this balance is maintained in real time by the transmission system operator, ČEPS. If actual operations deviate from the reported plan, an imbalance arises that ČEPS must correct using balancing energy—and this generates additional costs. If the deviation occurs when there are sufficient low-cost sources available for regulation, the impact may be relatively small. However, if it occurs at a time when the grid is strained and balancing energy is expensive, balancing it can be very costly. A key factor is that the cumulative cost of a deviation is not determined solely by the magnitude of the immediate difference, but also by how quickly and effectively operations can respond to the change to prevent the imbalance from carrying over into other parts of the day. If the plan is not continuously updated throughout the day and operations do not work with it, the difference gradually increases and costs rise.
One of the most common misconceptions is the idea that the main economic factor is the price of electricity itself. In reality, the costs associated with operational inaccuracies can be just as significant—and sometimes even more so. The predictability of operations, the ability to adhere to the plan, and the effectiveness of responses to deviations also play a significant role. If this capability is lacking, uncertainty is directly reflected in costs—whether hidden in the price or directly in the deviation billing. This is precisely why it is advisable to plan production and consumption as close as possible to the moment of their actual occurrence.
Deviation: A Technical or Managerial Discipline?
At first glance, it may seem that deviation is a purely technical issue—a matter of measurement, technology control, or dispatch. However, it arises primarily at the interface between the plan and its execution. And today, this interface is more about management and communication than about the technology itself. What matters most is how cooperation between operations and sales is structured—whether there is agreement on the daily production or consumption profile and how quickly both sides can respond to changes throughout the day. If this link does not function, the imbalance naturally grows—not because the technology is failing, but because the plan and reality are not sufficiently aligned.
The difference is clearly evident in the frequency of such coordination. With annual or monthly planning, the deviation is inherently high. With more frequent coordination, it gradually decreases. However, the real shift occurs when the plan is prepared a day in advance and continuously adjusted throughout the day based on current developments—whether it be weather, traffic, or the situation in the grid. In this mode, the deviation ceases to be an unmanaged cost and becomes a variable that can be actively influenced. The deviation is thus, in essence, a technical discipline, but one that relies on the willingness to manage it—that is, to plan, communicate, and react as closely as possible to actual operations.
Why “fixed rates” are often more expensive than they seem
Many businesses seek certainty above all else when it comes to energy. They want a price agreed upon in advance, a clear plan for the year, and are unwilling to deal with day-to-day market fluctuations. At first glance, this is a convenient and straightforward approach—but this certainty comes at a cost. If a supplier assumes responsibility for operational uncertainty—that is, for the fact that actual consumption will deviate from the plan—they must factor this risk into the price. They base this on historical consumption patterns and account for the fact that a certain degree of deviation cannot be eliminated. The less predictable the grid—and today, prices as well—are, the larger the buffer included in the price.
The result is that the customer pays not only for the electricity itself but also for the cost of this inherent uncertainty—it’s just not visible at first glance. It’s factored into the price. This model creates an impression of stability, yet it means that the cost of the deviation is paid upfront, regardless of how demand behaves. While this gives the utility “peace of mind,” it also takes away the opportunity to influence this outcome and save on unnecessary costs. The answer to such a model is the open-book approach, which forms the basis of the ORGREZ TRADE service.
What Is Open-Book and Why Is It a Fair Approach
Open-book is based on the opposite logic: you don’t pay a flat fee for estimated inaccuracies, but for the actual result. Instead of the trader including a buffer for deviations and other uncertainties in the price upfront, these factors are handled openly. Transparently. With an open book.
In practice, this means that we bill retrospectively for how much was actually produced, what was delivered, what the actual deviation was, how much balancing energy cost, and what the overall economic result was. In this way, ORGREZ TRADE links trading to the customer’s actual operations and gives them a direct connection to how their decisions affect the final price.
The customer can thus see exactly what they are paying for. Not an estimate. Not in a package. Not hidden in a single price.
But in reality—step by step. The real difference, however, lies elsewhere. When the deviation is not hidden in the price but is transparently reflected in the result and shared with operations, there is room to influence it. Operations are no longer just a passive recipient of the price but actively participate in determining the resulting economic effect.
Why Some Open-Book Customers Are Wary
This concern is understandable. As soon as it’s mentioned that the cost of a deviation can be very high in certain situations, the natural reaction is caution. In practice, two main reasons recur. The first is a reluctance to take responsibility for the outcome. If the customer leaves the risk to the trader, they gain a sense of security. But the risk doesn’t disappear—it’s simply reflected in the price. The difference is that in this model, it can no longer be influenced.
The second reason is the desire for simple budget planning. Many operations want to have the year “mapped out”—to know how much they’ll produce, how much they’ll sell, and what the result will be. But the reality of today’s energy sector is significantly more volatile. As already mentioned, operations are influenced by a number of variables that cannot be precisely fixed in advance. They can only be continuously taken into account and managed.
The fixed-price model often does not provide certainty, but only an accounting illusion of it—at the cost of a reserve paid in advance. Open-book is less convenient in this regard, but it reflects the reality of operations. It does not hide uncertainty within the price but manages it over time. Therefore, it is better to apply standard economic procedures just as with other dynamic corporate inputs. For example, working with a higher cost price and allocating any improvements to reserves, releasing them only in the subsequent planning period.
The uncomfortable truth: deviations need to be managed, not hidden
Shifting the blame onto someone else won’t make the problem go away. In an open model, the situation is the opposite. Operations can see what the plan was, how reality is unfolding, and what impact the deviation is having. At that moment, they can intervene—adjust output, change the technology mode, or respond to the current situation in the system—and thereby mitigate the deviation. The key is that this response occurs at a time when it still makes sense.
This is where the value of the ORGREZ TRADE service comes into play. It integrates forecasting, planning, and trading so that operations have access to up-to-date information about their deviation, as well as recommendations on when to pay closer attention to control. This is not about continuous monitoring, but about targeted interventions at moments when they have an economic impact. Operations are thus not left on their own. They have the tools and support available to actively manage the deviation. Open-book is therefore not about transferring risk to the customer. It is about giving them back the ability to influence the outcome.
How It Works in Practice
In practice, it always starts with a plan for the next day. Operations know what their profile should be—when to generate, when to consume, which sources will be in operation, and how flexible resources, such as storage, will be utilized. However, this plan is not static. As actual operations approach, the plan is gradually adjusted to reflect reality. Conditions change, predictions become more accurate, and the plan is further adjusted throughout the day. This adjustment takes place as close as possible to the moment of generation or consumption. If the plant has tools available that continuously compare the plan with reality, and at the same time the plant is able to react—whether by adjusting operations or its trading position—the likelihood of costly deviations decreases significantly.
Flexibility plays a crucial role here. An operation that can separate the moment of production from the moment of consumption—for example, through the storage of heat, cold, or electricity, the use of alternative sources, or changes in technology mode—has a significantly greater ability to respond to developments throughout the day. It is precisely this kind of environment that is a prerequisite for the effective use of the ORGREZ TRADE service. It is not about trading itself, but about the ability to integrate planning, operations, and the market into a single, coordinated system.
Open-book is not just a billing model. It is a shift in mindset
It is not just a different type of contract. It is a different way of managing operations. The traditional approach is based on stability and minimizing change. The modern approach is based on the premise that change is natural—and that it creates opportunities for optimization. Open-book means that operations do not try to eliminate uncertainty in advance, but work with it over time to benefit operational efficiency. The key is more accurate forecasting, more frequent plan updates, and the ability to react at the right moment.
However, this approach requires discipline and collaboration. At the outset, it is necessary to gain a detailed understanding of the operation—its behavior, operator habits, reactions to external conditions, and technological limitations. The experience of the operations staff plays a crucial role in this phase. Gradually, however, the system learns, compares proposals with reality, and refines its predictions. The result is not just a lower deviation. It is also more precise control and a more stable, better-predictable operational economy.
Transparency as a Competitive Advantage
Transparency in the energy sector is not a matter of marketing, but of management. When operations have access to accurate data on how their plan, actual performance, and deviations are evolving, they can actively work with that information. Management has the basis for decision-making. The dispatcher knows when to pay closer attention and when, conversely, it is not necessary to overburden operations with overly strict control.
Practical experience shows that it is not necessary to manage operations with precision at all times. What matters are specific moments—typically during rapid changes in conditions or in situations where deviations have a significant economic impact. At these moments, it makes sense to focus attention and make corrections. A transparent environment thus creates a common framework for all levels of management—from operations to senior leadership—and this alignment on data and decision-making becomes a practical competitive advantage.
If you want lower costs, you have to work with reality
ORGREZ TRADE is built on the integration of operations management and trading. The goal is not to shift responsibility to the customer or turn them into a trader. The aim is to create an environment where the client’s operations team can manage deviations in real time and have the tools and support needed to make the right decisions.
In practice, this means planning as closely as possible to actual operations, continuously comparing the plan with reality, the ability to adjust operations and trading positions on the fly, and, above all, reducing the costs of inaccuracy. However, the key benefit lies not just in individual tools. It lies in integrating operations and the market into a single, managed entity. Decisions regarding generation or consumption are based on the current economic context, not merely on technical or historical parameters.
Deviation is no longer a marginal phenomenon. It is a direct economic factor. As market dynamics intensify, so does its significance. And with it, the difference between operations that merely tolerate deviation and those that actively manage it. An open-book approach requires greater discipline, cooperation, and a willingness to work with real data. On the other hand, however, it enables precisely what matters most in the energy sector today—influencing the economic outcome.