For many large businesses, energy procurement is a top budget expense. However, with so many moving parts demanding attention daily, energy can be relatively low on the list of budget considerations. While energy consumption continues to tick away at budget dollars, your business may be spending money on energy unnecessarily. That is why it pays to know your energy needs and costs, and proactively develop an energy strategy that meets budgetary goals and business objectives.
If you are a CFO in manufacturing, health, education, property management, or the like, it is a good practice to have energy on your risk management map to help lower costs through strategic energy procurement and management.
Here are 5 tips to help you more effectively manage your energy costs:
- Knowing how your energy is being purchased can pay big dividends
Energy procurement is one of those responsibilities that can be anywhere on the list of priorities in your organization. It may be in Procurement, Facilities, Environmental Health, and Safety, or Finance. In working with several hundred companies and competing against a couple of hundred brokers, one thing is clear: the quality of your energy procurement is highly dependent on who is buying your energy. Not every business has in-house energy buying expertise and seeking outside advice and consultation can pay big dividends. - Identify energy cost-saving opportunities
In deregulated energy markets, you can lower your energy costs with the right energy supply product and leverage the competitive bidding process among multiple suppliers. In addition, there are services that can reduce your energy demand, such as demand response, energy efficiency measures, and the use of renewable energy such as onsite solar or renewable energy credits (RECs). Your energy plan should include the right mix of strategy and services based on the energy markets you are in and your specific usage circumstances. - Make data-driven choices to maximize savings and reduce risk
Electricity and natural gas prices are influenced by several factors. Making decisions about procuring energy involves the known and the unknown. It is important to analyze how you are using energy and how it’s impacting your costs. Knowing your budget and objectives can help you effectively mitigate risks and prepare for unknowns – such as future energy prices. Strategic analysis will inform the appropriate strategy, product, and duration for your energy buys. - Understand the nuances of your energy contract
Your energy supply price is made up of many components. It’s important you understand all of the factors that go into your contract price and whether your energy contract assigns the risk of changes to you or your supplier. Your energy contract should also take into account building expansions, moves, closures, onsite and offsite generation, and other initiatives that could affect your rates or cause penalties. - Measure results and adjust accordingly
Once you have established who is accountable for your energy procurement strategy, it is important to establish some metrics including measuring your property’s energy usage patterns, identifying areas of waste, making adjustments to improve energy efficiency, and tracking energy spend. This data can be gathered from a number of sources – building management systems, utility/supply bills, and metered data from your suppliers – to name a few. Measuring your company’s energy usage and spend on a month-to-month basis is the best way to understand how your strategy is affecting your bottom line and identify areas that need improvement. Revisit your strategy and goals periodically and adjust as needed. It is also important to keep a pulse on the energy industry so you can act on any advantageous changes in the market.
Cost-effective energy management is increasingly complex in today’s business climate and energy prices can be volatile. If you don’t have the in-house expertise to develop a cost-efficient energy strategy for your company, Premier Power Solutions has a team of experts who can work alongside your team to proactively analyze your needs, manage your risks and identify savings opportunities.
Download the Energy Procurement 101 White Paper to learn more or Contact a Premier Powers Solutions consultant today to take your energy strategy to the next level.