Chapter 1: The Fundamentals of Commercial Energy Procurement

What is commercial energy procurement? Why would a business make the switch? And who’s in charge of doing so?

This section addresses these energy procurement basics, including what organizations should expect when seeking wholesale energy vendors, what contracts exist and who’s involved in every energy procurement step along the way.

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What Does Energy Procurement Mean?

Commercial energy procurement is the process of sourcing the fuel or electricity a business needs to power its operations. This can be done by purchasing fuel from retail suppliers or from a utility company.

Many states are rolling back restrictions and allowing businesses to source energy from private retailers. These changes present an alternative to utility company-monopolized contracts — trading traditional gas, oil, and electricity models for deregulated, competitive, and transparent retail partnerships.

Managed proactively, energy procurement with a retail vendor can bring businesses a list of advantages, including:

  • Reduced energy costs
  • Increased operational efficiency
  • Improved operational sustainability
  • Greater peace of mind in running your business

Utility procurement is another term for energy procurement. This is the process by which businesses look for the most favorable energy contracts providing the services they need. Energy procurement involves finding an energy supplier that has lower pricing and, often, a solution that meets your needs specifically. Many businesses have special requirements for their energy. Pairing with the right supplier delivers greater efficiency.

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What Does Energy Procurement Mean?

Commercial energy procurement is the process of sourcing the fuel or electricity a business needs to power its operations. This can be done by purchasing fuel from retail suppliers or from a utility company.

Many states are rolling back restrictions and allowing businesses to source energy from private retailers. These changes present an alternative to utility company-monopolized contracts — trading traditional gas, oil, and electricity models for deregulated, competitive, and transparent retail partnerships.

Managed proactively, energy procurement with a retail vendor can bring businesses a list of advantages, including:

  • Reduced energy costs
  • Increased operational efficiency
  • Improved operational sustainability
  • Greater peace of mind in running your business

Utility procurement is another term for energy procurement. This is the process by which businesses look for the most favorable energy contracts providing the services they need. Energy procurement involves finding an energy supplier that has lower pricing and, often, a solution that meets your needs specifically. Many businesses have special requirements for their energy. Pairing with the right supplier delivers greater efficiency.

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What Is an Energy Procurement Service?

Given that energy procurement acquires energy from suppliers or utility’s to be used by businesses, procurement services are those that aid businesses in tha process. Setting up and maintaining an effective procurement department within a business can be costly.

Using a procurement service can be far less expensive than setting up an internal team, and it will be more effective at ensuring a business’s energy plan is cost-efficient. These providers take steps to obtain materials, supplies, goods, services, and contracts at the best price for the businesses they work with.

Procurement service providers aid businesses on multiple levels. To start, they work with businesses to develop a plan for their energy usage. They’ll analyze the company’s energy needs and the practices currently being used to meet them, looking for where the company can increase energy efficiency and cut costs from suppliers.

Beyond internal analysis, procurement providers also use their knowledge of the industry to determine the best supplier for a business’s energy, sometimes even collaborating with suppliers to find the best deal. By using an energy procurement service, customers are more prepared to make the most of their energy usage and are ensured excellent energy coverage at a reduced cost.

How Does an Energy Procurement Service Work?

Energy procurement service providers use their knowledge of the industry in conjunction with their understanding of best energy-use practices to develop plans for businesses looking to save money and increase their energy efficiency. There are a few standard approaches that procurement service providers will implement when working with customers. These processes range from internal and market analysis to setting up an actual relationship between the customer and the energy vendor.

1. Internal Analysis

In order for a procurement service provider to connect a business with the best possible energy supplier for its needs, procurement companies will conduct an analysis of the customer’s energy usage.

This process is quick and easy with Energy Objective through Shipley Energy. Customers will send us a recent bill copy and a current contract end date. Then, our experienced professionals will do all they can to learn about the customer and develop a natural gas procurement and delivery plan catered to their short-term and long-term plans.

2. Vendor Selection

Given an understanding of a customer’s energy usage, procurement providers will consider all available options for natural gas suppliers. With a list of potential suppliers, providers will narrow the selection to favor those that offer the best prices for the goods and services needed. They may also implement quality and safety control strategies to ensure an energy supplier’s offerings are safe for employees.

Shipley Energy will coordinate and negotiate with the best suppliers to gather pricing options for our customers. We’ll then evaluate the offers to compare important metrics, including:

  • Volume
  • Units
  • Bandwidth
  • Balancing
  • Emergency procedures
  • Potential extra charges

3. Creating a Purchase Order

With all of the necessary information at hand to make an informed decision, procurement service providers will mediate a deal between the optimal natural gas supplier and the customer. After the sale, procurement teams can provide further services such as bill auditing, market updates, utility assistance, and renewal pricing.

Who Is Involved in Business Energy Procurement?

It’s common practice for businesses across industries to shop around for the vendors best suited to their unique needs. But many don’t shop for energy in the same way.

In deregulated states, businesses can now vet regional energy retailers to find the right fit. In these states, finding the right energy provider is no different than shopping for the right raw material or service provider.

So, if businesses can shop for energy, who does that shopping? That process typically involves the following players:

1. The Energy Purchasing Customer

Many people don’t realize they have a choice in where to buy natural gas and electricity. Shopping for the right vendor can be a powerful way to achieve savings and increase the amount of support your company receives.

Who is typically involved in this process? You don’t need to have the word chief or senior at the beginning of your title to start the energy procurement conversation.

However, there are five roles in most of today’s business hierarchies with particular stock in energy management. These five energy stakeholders are referred to in this guide as energy procurement managers. They include the following:

  • Facility managers
  • Fleet managers
  • Supply chain or purchasing managers
  • Small business owners
  • Chief financial officers (CFOs)

While energy procurement managers may have different titles and overall responsibilities, one business objective remains consistent — achieving greater cost savings for the organization through effective energy purchasing plans.

2. The Vendor or Supplier

Suppliers are the private, wholesale, retail energy companies providing energy to customers. An alternative to utility company contracts, suppliers procure energy from a variety of power plants and sources. They can then turn around and offer competitively-priced, individually-tailored energy packages to commercial businesses seeking more energy control and better pricing than off-the-shelf offerings from the utility company.

3. The Broker

As a third-party participant, energy brokers play a similar role to that of a real estate broker in the property buying process. Energy brokers bring buyers and sellers together, namely working with energy procurement managers to understand their organization’s needs and then reaching out to suppliers who can best meet them.

Energy procurement managers can choose to work with a broker or not. Depending on their industry or the nature of their business processes and operations, brokers can answer questions and provide additional support while a business vets potential sellers.

4. The Utility Company

Utility companies still play a role in commercial energy procurement, namely in generating and delivering power. While deregulation allows other companies to sell energy, utility companies can continue to sell it, yet they also remain responsible for the infrastructure delivering power.

Utility procurement can assist you in finding better pricing while still using your utility company. Your business’s bills will continue to come from the same place. The distributor’s name remains on them. Energy procurement means shopping around for a supplier that will provide more favorable pricing than your utility company or another supplier you may have been using. You can benefit from the competitive energy products on the market.

Hear from real businesses about the doors an effective commercial energy procurement plan opened for them.

What Type of Organizations Can Use an Energy Procurement Service?

Energy procurement services are beneficial to nearly every type of business. All companies have overhead energy costs. When you use utility procurement companies, you stand to reduce those costs and may also even find more favorable packages that include other perks as well. You can also get easy access to green energy, which delivers on your company’s desire to use more environmentally friendly sources.

It’s difficult to think of a business that couldn’t benefit from energy procurement strategies. Some of the types of businesses that employ this service include:

  • Nonprofits
  • Small businesses
  • Industrial and commercial organizations
  • Governments
  • Schools

Your company can benefit, too. Any company with a focus in any area can enjoy savings when you switch your supplier, and energy procurement services make the process easier. You can feel confident you’re getting the most favorable deal when you have analysis and research behind your decision.

Why You Need a Commercial Energy Procurement Plan

Having the right energy procurement strategy in place can save you money. Such a strategy puts you in control of your company’s approach to energy. That power allows you to tailor your plan to your needs, not the needs of another business.

You can decide on a pricing structure that matches your unique requirements, for instance. You may prefer fixed pricing or market pricing. Perhaps you want to try blended pricing for the opportunity to receive more potential savings. Since every business is different, not all will benefit from these strategies. You can pick and choose what suits your individual needs.

Commercial energy procurement can also simplify things for your company. For instance, you might receive just one bill for your gas services instead of getting a bunch of bills for different facets of your operation. This makes it easy for accounting and bookkeeping. Taking the strain off those in your organization and making things flow better is one major benefit of using energy procurement.

You can also delve into questions that could save you more money in the long run when you have an individualized plan. Some things you may want to consider include:

  • Are there any partnerships or consortiums available?
  • Are alternative fuels available?
  • Can you negotiate on pricing or other aspects of the deal?

Energy procurement managers should take a deep look at which fuel types and amounts their operations use. Compiling this information creates your energy portfolio. Brokers can step in to help customers navigate potential vendor offers and market prices in these early auditing stages based on their portfolio.

Alternatively, commercial customers can work directly with energy retailers to get quotes and tailor contracts serving their complete commercial fueling needs.

Understanding Fuel Types

A fundamental to the process of business energy procurement is understanding the fuel types that are available to you. Tailored retailer plans can include all, a few or just one of the following fuels:

Energy Contract Types

There are many ways to structure today’s energy purchasing contracts. However, several primary contract types exist for customers to adopt through their chosen energy vendors:

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Why You Need a Commercial Energy Procurement Plan

There are many benefits to better controlling and sourcing your fuel. Some businesses fixate on energy as a commodity — an untouchable overhead expense that should only be purchased based on the lowest price. The right procurement strategy turns this energy into a competitive advantage.

How can retail energy providers better serve your business? A customized procurement plan allows your business to experience benefits it simply couldn’t from a conventional utility contract, including:

1. Increased Peace-of-Mind

A well-planned energy procurement strategy can add certainty and dependability to operations including the following components:

  • Scheduled deliveries, and potentially fixed rates means contract commitments and action plans with very few surprises.
  • Minimize the risk of encountering unforeseen charges, hidden feeds and costs.
  • More informed load forecasting based on research and monthly usage reports sent to you by your vendor.
  • A reliable source of fuel — essential for industries like construction, manufacturing, transportation and healthcare.
  • Custom-tailored energy-management advice from independent brokers and/or your vendor.

2. Greater Energy Autonomy

Customized energy procurement plans give your business greater autonomy, letting you:

  • Have proactive, not reactive, control over fuel costs, fuel types, financing and billing schedules.
  • Call the shots with contract specifications, financing and fuels sourced.
  • Create a commercial energy partnership with new tiers of personalization, flexibility and organizational goal alignment few utility companies can match.

3. Simplified Vendor Relationships for All Energy Needs

An energy procurement plan can consolidate your vendors, providing you with:

  • A one-stop-shop for energy documents, billing, questions and concerns.
  • Simplified, organized delivery schedules and transaction management, often through one digital system.
  • Dedicated account managers who know your business needs and how to help you succeed.

Introduction: What Is Energy Procurement and Why Does It Matter?

Chapter 2: What Drives the Prices of the Energy Market?

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