The Most Successful Energy Procurement Strategies You Can Use in Your Business

Chapter 4: The Most Successful Energy Procurement Strategies You Can Use in Your Business

Successful energy procurement starts with being proactive.

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There is no universal formula for cracking energy's competitive advantages and achieving business growth. However, working with a vendor who knows your industry can give your business a leg up on the competition.

We've continually seen business results driven by the following procurement strategies:

1. Pricing Structure Suited to Your Business — Not What Everyone Else Is Doing

Commercial energy vendors provide more contract flexibility and customization, including through financing. Successful businesses adopt pricing models that work for their current cash flows, risk profiles and administrative capacities.

  1. Fixed Pricing: Energy billing is developed based on a fixed rate. This pricing structure creates budget certainty, something not guaranteed by most commercial utility companies.

  2. Market Pricing: Fuel costs match the current market price, but at delivery schedules you determine.

  3. Capped-Rate Pricing: Never pay over your contract’s capped price set at enrollment — but still have the possibility to pay less if energy prices drop. In Pennsylvania, Shipley Energy is one of the few commercial energy suppliers to offer capped prices and contracts for certain fuel assets.

  4. Blended Pricing: Billings involve more exposure to market volatility but a greater chance to experience cost-savings. Blended contracts are also more customizable, since an energy procurement manager can negotiate the percentage of fuel volume that’s fixed (e.g. 75 percent) and the percentage that’s variable (e.g. 25 percent).  

  5. Indexed Pricing: Businesses seeking more upfront, transparent input costs may find indexed pricing attractive. The negotiated price differentiation gives businesses a more stable, consistent foundation for their billings. While they still take on the variability of day-of delivery prices and changes in practices and processes for raw fuel sourcing, they have a set fee they add-on for suppliers.    

  6. Swing Policies: Organizations who frequently review usage reports and initiate proactive load forecasting may find the most advantages in a swing policy. Their data analysis means they’re more likely to remain within their contract’s swing margins, and therefore see budget certainty similar to fully fixed pricing.

2. Streamlined Billing

Imagine the construction fleet manager who — instead of receiving dozens of fuel invoices in a single month — sees one bill, at one time, across all work-sites. Simplified billing let businesses cohesively manage rather than react to energy invoices. Simpler bill management ushers in all kinds of business advantages:

  • Reduced paperwork, meaning less manual account ledger oversight and less accounting confusion.

  • Bills and documents consolidated in one online system, from one vendor portal, for end-to-end billing, payment, transaction and contract management. If you or your staff have an issue, you know which vendor to call.

  • Staff unburdened from redundant and inefficient manual billing processes.

  • Time and money saved — a constant goal for CFOs and supply chain managers who need to account for every penny.

3. Continually Analyzed Data and Auditing

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Successful energy procurement strategies prioritize data analysis. Through their retailers, procurement managers have deeper access to richer energy usage reports to make data-backed fueling decisions. With more clarity and confidence, you can continually analyze data from:

  • Usage and consumption reports generated by your vendor, received at regular intervals.

  • Auditing charges from utilities and outside suppliers to ensure they conform with the actual contract.

  • Fleet-fuel usage analysis to help track consumption by vehicle, potentially showing areas of waste, fraud or vehicles that need maintenance.

  • Reports that are thoroughly itemized, even noting change variables like inclement weather.

When analyzed properly, data can make management decisions objective, not guesswork.

4. Businesses Have a Dedicated Energy Management Workflow

The most streamlined businesses have a known chain of command for any energy-related concern. That process is built into their organizational charts and understood by all personnel involved with energy operations.

With an energy procurement strategy, communications are quicker. Paperwork is reduced. Invoice approvals are simplified. All stakeholders have a direct line of contact to account representatives at their energy supplier when questions arise. Energy management workflow responsibilities run clearly from:

  1. The CFO and COO

  2. Operations managers — facility, fleet, supply chain and purchasing directors

  3. Account representatives or brokers

Each person understands their place in the chain of command, including where to route documents, who fields questions and who signs off on purchase orders, monthly statements and fuel reports.

See the actual success benchmarks and KPIs an energy procurement strategy can afford your business.

What Are Other Creative Strategies for Energy Price-Savings?

For more out-of-the-box cost savings opportunities for commercial energy procurement plans, consider the following tips.

1. Ask About Partnerships and Consortiums

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Determine if an energy supplier has industry partnerships that may enhance package prices or offerings. For example, Shipley Energy is the Lancaster Chamber's partner for natural gas, which results in discounts for chamber members.

2. Consider Alternative Fuels

Alternative fuels do not require expensive infrastructure overhaul and minimize the impact of your energy consumption on the environment. Renewable energy and secondary sources can augment what fuel you already use, making your operations more responsive and responsible.

Ask if energy vendors offer carbon offsets and alternative fuels alongside their conventional packages. These alternatives may include:

3. Consider Demand-Response Programs

Demand-response programs incentivize businesses to cut back on energy consumption during periods when area demand outpaces supply.

Incentives can include discounts, rebates or complementary services if the customer commits to a predetermined load reduction. An energy vendor or broker outlines your business' attainable load-shedding amounts, then provides strategies to help you meet those percentages. In other words, you get paid to use less energy, plus receive guidance on how to do so.

4. Always Negotiate

Contract agreement terms are just that — terms you as the energy procurement manager agree to. Use your new partnership to craft a contract that truly satisfies your business' operations and your bottom line. Outline specific financing options, payment installations, delivery schedules and even additional customer support perks.

Which Energy Procurement Strategy Is Best for Me?

Again, there is no one-size-fits-all solution to cost-effective, operation-enhancing energy sourcing.

The best procurement plan is one that simplifies billing, creates predictability, directly meets your fuel and power needs, provides metric-backed cost-savings and improves operational outputs.

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