If energy procurement is one of the many hats you likely wear, you know all too well the challenges surrounding it. With the energy industry changing at a record pace, good energy management is becoming increasingly complex in today’s competitive business environment. Being able to stay on top of shifting energy markets can be tough when energy procurement is just ONE of your responsibilities.
Below are a few steps on how you can approach energy supply procurement.
First, you need to determine how you would like to purchase your energy. There are three ways to do so:
- Don’t do anything– Receive the standard rate from your utility.
- Go at it alone– Purchase directly from an energy supplier.
- Team up with an expert– Use an energy advisor or broker.
Once you decide how you’d like to purchase your energy. It’s time to think about how you’ll approach your energy procurement strategy. Here are 4 best practices:
- Know what drives energy markets. Market prices fluctuate daily, rising and falling in response to a host of drivers such as the economy, unexpected weather, regulatory and political events. Longer term pricing is impacted by energy supply forecasts based on retirements and development of new power plants, natural gas production and pipeline delivery capacity. It’s vital that you continuously monitor the market to make good buying decisions. If you’re on top of the market, you can take advantage of today’s forward market prices in a supply agreement that begins when your current contract expires, even if the expiration date is far in the future.
- Be strategic. Monitoring and managing your consumption is another essential component to smart energy procurement. When devising your energy plan, it is important to look at the ways your organization uses energy and how they are reflected in your current procurement process.
- Analyze your data. Energy usage data, as well as utility and supply bill data, can provide significant insights into how your facility uses energy and how your organization is being charged. These insights can help you make more informed budgeting decisions and identify areas for cost improvement. Joining all your data together into a usable format that can assist you in decision-making is challenging, but will reap countless benefits.
- Understand contract types. Before you move into the next phase, buying energy, it’s important to understand the commodity purchasing options available. It can be as simple as a fixed or index priced all-inclusive contract, or as complex as a block and index deal, managed service, or multi-layer hedging with a variety of variables.
Managing your organization’s energy procurement strategy can be complex. Market monitoring and strategic planning can help you avoid common procurement mistakes and put you on a path that maximizes cost savings for your organization.