Energy Procurement for Commercial Real Estate

Energy Procurement for Commercial Real Estate

Commercial real estate energy efficiency is an essential part of running and maintaining your property. You have many expenses to manage, so you should save money where you can, including how much you’re spending on your building’s energy needs.

Many real estate property owners think energy prices are out of their control. But did you know, depending on your location, you can have a say in how much you spend on your property’s energy? Take charge of your expenses for potentially lower monthly payments and more room in your budget. Learn how energy procurement for commercial real estate can benefit you below.

What Does Energy Procurement Mean?

Commercial real estate energy procurement involves the process of obtaining the electricity or fuel you need to power your building’s operations. You can procure your fuel from a retail supplier or a utility company. All that matters is you’re sourcing your fuel from a supplier and using it to meet your commercial building’s demands.

What Does Energy Procurement Mean?

The question is, what options are available to you as a commercial real estate property owner? In recent years, many states have started reversing energy buying and selling restrictions. Businesses can then get their energy from private retailers instead of a single, state-issued energy supplier. Now you have an option in where you get your energy from, leading to more control over how much you’re paying on your monthly energy bills.

Competitive markets open the door to competition between suppliers, which can result in lower prices for businesses and commercial properties — the entities that buy and consume the fuel. If your commercial property exists in an energy-deregulated state, you have the option to procure your energy in a way that works for you.

The Fundamentals of Energy Procurement for Real Estate Owners

You have options when it comes to energy procurement. Think of this task as you would shopping for any other product or service. You need it, and the companies have it. It’s a matter of finding the one that suits your needs, and the power is in your hands to find the right one.

Making an informed decision comes down to two factors. The first is knowing the various roles involved in the process. The second is understanding the different types of contracts available.

The Different Roles Involved in Commercial Real Estate Energy Procurement

Here are the four main entities involved with energy procurement for commercial real estate:

  • The energy-purchasing customer: You or an appointee will fulfill this role. As the owner of the commercial property, it’s your duty to make sure your building is receiving the energy it needs to function. If you have other responsibilities to attend to besides shopping for energy, you can leave the task to a facility manager, a small business owner renting your property, or a chief financial officer (CFO).
  • The energy supplier: These are the wholesale retail energy companies that meet the customers’ energy needs. They get energy from several power plants and sources. In deregulated states, energy suppliers compete to be the one you choose for your commercial property.
  • Brokers: Energy brokers act as the bridge between buyers and sellers. They can help you understand your needs and find an energy supplier that can meet them. Brokers are optional in energy procurement, but their services could be beneficial.
  • The utility company: Utility companies have a huge impact on your costs. Their role is to distribute, or deliver, the energy to your building and make sure there is a functioning infrastructure in the area. They can also sell you the actual commodity, but customers often find cheaper, more budget-friendly alternatives with energy suppliers.

The Types of Contracts

The types of contracts available from suppliers are where you’ll start to see real savings in the energy procurement process. Here are some of the contracts you can choose from:

  • Fixed: These contracts lock in your rate for a set period, and you get a consistent price for budgeting purposes. The only downside is if the market drops during your fixed price period, you won’t be able to enjoy lower energy payments.
  • Variable: Variable contracts include prices that can fluctuate with the market, depending on the state of the market. You can enjoy lower prices during dips in the market, but you’ll have to pay higher prices when the market value of energy increases. It may be harder to set a budget with a variable contract, but the dips in costs might be worth it to you.
  • Indexed: This type of contract deals with a price index in which pricing is based on. There is typically an adder to the index price for delivery. You see this more with liquid fuels like diesel, propane, oil, and gasoline. It allows you to negotiate the price you pay a supplier on top of the fuel’s current wholesale price.
  • Blended: Blended contracts combine attributes of fixed and variable contracts to give you some of the benefits of each with fewer risks. A blended contract gives you the predictability of fixed monthly costs with some room to enjoy more affordable prices if the market price drops.

Why You Need an Energy Procurement Plan for Commercial Real Estate

As the owner of commercial property in a deregulated state, you should develop an energy procurement plan. Some property owners see energy as an untouchable expense they have to deal with until the end of time. Thanks to deregulation, you can enjoy lower prices and have flexibility with where you get your energy from. With an energy procurement plan, you can start the process of obtaining your energy in a way that benefits your business.

Why You Need an Energy Procurement Plan for Commercial Real Estate

Approach formulating your energy procurement plan as more than a way to be a responsible energy shopper. View it as a way to give you an advantage over your competition. If you rent your commercial property to small businesses, they’re going to want to enjoy more affordable energy prices, as well. You can attract tenants by offering the best energy prices in the area, keeping your space filled and active.

This consideration can reduce your overhead and open your budget for other matters involved with owning a commercial real estate property. You’ll have a game plan so you know where to look, what questions to ask, and how to make sure you’re getting the best value for your energy. With an energy procurement plan, you’ll know the kind of energy prices you need to operate your commercial property as efficiently as possible. You’ll save money, but you’ll also be able to experience many more benefits as a result.

Benefits of Energy Procurement for Commercial Real Estate

Let’s take a closer look at some of the other benefits you can enjoy by implementing an energy procurement plan for your commercial property.

1. Peace of Mind

Owning a commercial property is a big responsibility. You have to keep it in good shape so it can be useful in your community. From repairs to inspections, there’s a lot to focus on to meet regulation requirements. Knowing you’re paying the best price possible for energy is one less thing you have to worry about as you maintain your property.

You’ll feel good knowing where your energy is coming from — and having a say in the matter. By staying in touch with your supplier and utility company, you’ll know how much you’re paying at all times. You’ll even know when your utility company will deliver your energy, helping you reduce risks and downtime.

2. Energy Autonomy

For some commercial property owners, more freedom from regulations is one of the best gifts they can receive. Regulations are important for safety and quality of life, but they ultimately limit your choices. If you care about having the freedom of choice in where you get your energy, then implementing an energy procurement plan is the way for you.

You’ll get to call the shots with where you get your energy from and what contract you sign up for. Instead of hearing about price changes and paying the difference, you can stay ahead of the curve and choose the type of budgeting option that works for your situation. With energy procurement, you get to be proactive and make plans based on your own preferences.

3. Simple Vendor Relationships for Your Energy Needs

Take the complexity out of dealing with energy suppliers and utility companies with an energy procurement plan for your commercial property. You’ll be able to consolidate your vendors so you know where to get your essential energy documents, receive billing information, and even lobby questions and concerns.

You’ll have a set amount of billing and delivery options to simplify the process even further. Many energy suppliers even offer a digital system to track your transactions and energy usage. And when you deal with the same account manager month after month, they get to know you and simplify the process even more.

How to Create a Successful Energy Procurement Strategy

You now know how a procurement plan can help you with commercial real estate energy management. Here are five factors that can help make sure your procurement plan is successful.

How to Create a Successful Energy Procurement Strategy

1. Assess Your Current Energy Needs and Risk Tolerance

Every commercial property is different. You should assess your needs to help you make the right decision about where you get your energy from and what type of contract you choose. Review your usage reports and see how much you’re paying across your current vendors. Then set a goal to reduce the number of vendors you’re working with. Choose an energy supplier that can provide you with several of your energy needs.

You should also decide how much risk you’re willing to take. If a firm budget matters most to you, you may seek a fixed contract. If you have more room in your budget to take risks in the hopes of higher financial returns, you may want to take your chances with a variable contract. Different contracts will work for various commercial properties, so assess your needs and risk tolerance to build the best situation for you.

2. Outline Your Operational Goals and Demands

Go into your energy procurement plan with the right mindset. You should know what you want to get out of your plan and how you’re going to get there. Understand your goals to help you better achieve them and experience the benefits of energy choice.

Shipley Energy can help you manage this step in the process. Talk through your needs with us so we can better help you understand what kinds of contracts and pricing will work for you. By outlining your goals and needs, you’ll be better equipped to make a smart decision for your commercial property’s energy solution.

3. Ask Questions

Be confident and ask questions when you begin contacting energy suppliers. Companies that answer your questions with openness and honesty are ones you can trust, but be wary of the companies that seem to dodge your questions. Here are some of the questions you should ask energy suppliers as you narrow down your search for the right one:

  • How long have you been in business?
  • Where do you get your fuel?
  • What types of prices do you offer?
  • Can you walk me through the different contracts you have available?
  • What industries do you serve and work with?
  • Do you offer any brokerage services for energy procurement?
  • Are there any hidden fees I should know about?

4. Review Your Options and Determine Who Can Best Meet Your Needs

Make sure you spend time shopping around to get a full picture of the options available to you. An energy broker could be helpful in this step, but even without one, you can take some time to make sure you’re covering the necessary ground.

Check your current energy contract to remind yourself of the termination date and start forming a severance plan. In the meantime, start negotiating with other energy suppliers. See which ones are willing to fight for you to be their customer. The suppliers willing to go above and beyond for you are the ones that should be on your shortlist.

5. Partner With an Energy Procurement Specialist

You need a partner in your energy procurement strategy. Look for a company that knows what they’re doing — one that’s been in the business for a long time. Consider Shipley Energy, a supplier who has been in energy for over 90 years, as your energy procurement solution.

Having a team of people to help you find the best energy solution for your commercial real estate property is essential. You may wonder how you ever managed your energy before such a partnership. Shipley Energy can change the way you think about energy procurement, making the whole process easier.

Contact Shipley Energy for Commercial Energy Procurement Services

If you’re ready to take the next step toward energy autonomy, then Shipley Energy is the company for you. Our dedicated, professional team is ready to help you find a contract that suits your business needs. As a commercial property owner in a deregulated state, you deserve the best price for energy possible. Our goal is to help you achieve that.

Call us at 1-800-839-1849 or contact us online today to learn more about our energy procurement services.

Contact Shipley Energy for Commercial Energy Procurement Services