Running a business is all about making strategic decisions to get closer to your organization’s goals. Many of these decisions come down to lowering costs, which in turn increases your bottom line. But the decisions are seemingly endless, and sometimes it makes more sense to consult an expert.
Energy procurement can be particularly overwhelming for business owners. Luckily for you, we got energy procurement experts here at P3 Cost Analysts to help you out. Here, we’re breaking down the basics of energy sourcing so you can understand the market better. If you still need help navigating the waters, we’ve got your back.
Energy procurement is the process of formulating a strategy to find the lowest pricing and best sources for your business’s specific energy needs. It involves dealing with local distribution companies (LDC) or third-party suppliers to make the smartest purchasing decisions based on a company’s particular requirements.
While it may seem straightforward, most business owners and employees don’t have the necessary expertise to navigate the strict regulations and ever-changing market. Many states are revising their regulations to provide a more fair market, making it harder to keep up with the current opportunities available. On top of that, the industry continues to evolve every year as we slowly transition to using more renewable energy opportunities.
The first step toward understanding energy procurement is to determine whether your company is in a regulated or deregulated state. To someone unfamiliar with the terms, having a regulated market might sound beneficial. However, in a regulated market, there is only one utility provider that has been granted a monopoly in that state. When a single utility company owns an entire state’s power supply chain, businesses are forced to do business with that entity.
In a deregulated market, a state has allowed multiple third-party companies to provide energy at their own rates. While typically there is still only one primary energy provider, the availability of multiple suppliers gives businesses the freedom to decide which they choose to purchase from. This competition tends to encourage lower pricing.
Each state has its own laws on whether the energy market is regulated or unregulated. Either way, the responsibility lies on the consumer to find savings.
Where you source your energy depends a lot on whether your company is based in a regulated or deregulated state. In a regulated state, businesses must purchase directly from the utility company. In deregulated states, there is the option to shop around for the best prices. Of course, it’s not that straightforward – there are also states that are partially regulated and deregulated.
If you’re in the business of making money, then a proper energy procurement strategy can benefit you. You can see substantial savings even if you don’t think your company uses that much energy.
But it’s not just for companies looking to improve their bottom line. Governments, schools, and nonprofits can also lower their costs, allowing them to reallocate parts of their budget to other needs.
The energy procurement process is designed to help businesses reach a more cost-efficient energy plan. In order to do this, it’s essential to focus on a business’s specialized needs. Therefore, an energy procurement service must first conduct a deep analysis of a company to determine its usage patterns and develop a tailored plan. The goal is to lower the risk of unexpected charges and help businesses better predict their monthly costs.
From there, it’s time to focus on energy sourcing. Once again, this will depend on whether the business is in a regulated or deregulated state. The energy procurement service must evaluate potential vendors to see which offers the most competitive pricing for the business’s specific needs.
The energy procurement services provider you’re working with will then help negotiate a contract with your chosen provider for electricity, natural gas, and any renewable sources you may use. After your contract is secured, the procurement company will continue to monitor your energy usage, invoices, and the market and help with any renewal needs.
Traditionally, this process focused on gas or electric procurement. Now, companies may consider entering the clean energy market. Securing assistance with an energy procurement service can help businesses navigate the new and complex sustainable energy market.
Choosing the right energy plan involves more than just finding the vendor with the lowest price. You have to consider different types of contracts that are available. There isn’t one clear winner here – it depends on your specific energy requirements, property-specific demands, risk aversion, and market drivers. Contacts fall under three categories:
Businesses that don’t have a full-time energy procurement expert should consider working with an energy procurement company. As this process can be complicated and time-consuming, hiring a third party can allow your employees to focus on their job at hand. Benefits of working with an energy procurement company include:
Working with P3 Cost Analysts as your company’s energy procurement experts is one of the smartest business decisions you can make. Our utility auditing services follow a very similar format to that of energy procurement companies. We will follow the best process for your business depending on whether your company is in a regulated or deregulated market.
P3 will comb through the last 12 – 36 months of invoices (depending on your state) in order to discover any overages or errors that have been incorrectly charged to your account. After that, we will continue monitoring invoices as they’re received each month to ensure maximum savings. For regulated markets, energy audits require no upfront costs on your behalf. Instead, P3 simply shares a portion of the savings we find you.
P3 will act as your energy broker to ensure that you find the best pricing on the market for your company’s specific usages. We will focus on finding the right time to lock into a contract to ensure that you’re not overpaying for your business’s energy needs. For energy broker services, P3 will collect a small commission.
Energy sourcing is already confusing and complicated as it is. Still, new regulations and advancing technology each year make it harder for the average business person to understand the industry. There are just too many moving parts for businesses to leave gas and electricity procurement services as an in-house job.
No matter what type of business or organization you’re running, it can benefit from an energy procurement company’s assistance. They will help you navigate the different kinds of contract rates and deliver benefits such as helping develop strategies, understanding options, reducing costs, improving forecasts, and taking back control over your energy costs.