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Procurement

  • Don’t Pay Any More for Energy Than You Have To
  • Match Your Energy Contract to Your Business Needs
  • Understand Fee Structures & Terms – Particularly Termination Fees
  • Find a “Fair” Energy Supplier Who Will Work For You

 

With energy costs comprising one of the top four expenses impacting most company’s bottom lines, it is critically important that you have a good procurement strategy in place. The continually changing energy market, and the multitude of energy suppliers – each with their own contract terms – makes it difficult to determine how to get the best deal for your energy dollars. Compounding the problem is the fact that most people do not really understand their energy bills, or how different utility rate classes, demand charges, or other transmission-related costs impact how much they actually pay for energy.

The first thing to understand is that there are two parts to your energy bill: the energy supply portion which you paid to your energy supplier, and the transmission portion which you pay to your utility. While most people focus on getting the lowest possible price for their supply of energy, few people think about the transmission-side costs of their bill – which can account for up to half of your total monthly energy cost.  Opportunities to reduce transmission side costs range include potential utility rate changes or implementing energy efficiency projects.

It is important to decide whether your goal is to pay the absolute lowest supply cost for your energy, or to ensure budget stability over time. Sometimes it makes sense to pay a little more for your energy in order to ensure that you will not have big swings in your monthly energy costs.

You want a reputable and knowledgeable supplier who can provide you with energy rates lower than what your utility can provide you. Find broker or agent who will take the time to understand your energy needs, review your energy bill with you, explain all of your options, and provide you with a clearly written energy contract at a fair price. Once you’ve decided on a supplier, you need to decide what kind of contract best fits your situation.

Generally, your goal is to find a fixed, all-in, no termination contract so that you don’t end up with any surprises down the road. “All-in”means that there will be no extra ancillary charges added to your monthly bill by the supplier.  Fixed energy contracts allow for budget stability, but the length of the contract may affect the benefits and may or may not be the best strategy for your particular situation.

Variable energy contracts generally provide for a lower initial energy cost, but the contract’s energy pricing will rise and fall along with the markets. Unfortunately, many people have purchased low-cost variable contracts only to be surprised when the initial “teaser” rate converted back to the market rate. However, there are times when a variable rate contract might make sense for business.

Sometimes an energy only contract, where the price of energy changes on an hourly basis, makes the most sense. For example a business that operates 24 hours a day, seven days a week, could benefit from such a contract.

The matter what kind of energy contract you by, you want to completely understand the terms associated with any early termination fees, and exactly how any penalties or other fees will be calculated.  Unfortunately, there are many examples of businesses that faced thousands of dollars in termination fees just to switch from one energy provider to another.


Fortunately, you don’t need to spend the time and effort to become an expert in energy procurement. Contact us and we’ll be happy to discuss the opportunities and explain your options.

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