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PRES Services

2430 North Forest Road
Suite 106
Getzville, NY 14068
(716) 633-1370

Optimizing Electric & Natural Gas Rates

Energy (electricity, natural gas, and other fuels) comprise a huge domestic commodity market over $80 billion/year for natural gas and over $325 billion/year in electricity. Roughly two-thirds of this market is for commercial and industrial uses. As with other commodities, strategic procurement can help customers manage costs by identifying favorable tariff structures and taking advantage of favorable competitive market opportunities in deregulated utility markets. A structured procurement plan can also help reduce the inherent risk associated with market price volatility.

Market Overview

As utility markets have deregulated and then matured, all utility customers have been exposed to variable market pricing. Whether as a pass-through from the local utility or as a priced product from a commodity supplier, customers now have to pay more attention to usage and how they are buying their energy. In deregulated markets, customers have the option to obtain alternative price products from the default variable price offered in many markets. Fixed, hybrid, and block pricing (offered by alternative, competitive suppliers) are tools which larger companies can use to manage the market risk of their energy purchases. For these customers, the objective is to stabilize energy purchases from year-to-year and to reduce the risk that any one purchase will "break the budget."

The Figure below demonstrates this pattern. Energy commodity prices respond to a myriad of influences including: weather, international prices, supply constraints/disruptions, seasonal buying cycles, pipeline capacity, commodity trading, new resource supply, energy efficiency, political events, and speculation. As a result, it is a stretch to expect commodity prices to naturally stay within a tolerable band. All energy managers will agree that over the last ten years there have been many surprises and we have all played the Monday morning quarterback game at one time or another when we have rued a purchase. As the Figure shows, the objective is to stay within a tolerable band, avoid the most severe price spikes and have some ability to purchase when the market price drops.
  Buy energy within a price band that matches your risk goal.

How Can a Managed Energy Procurement Program Help You?

It's about balancing risk vs. cost. For larger customers with multiple facilities and/or larger facilities we take a strategic approach to structuring the purchasing. The first step is reviewing our customer's procurement experience and establishing (based on the lessons learned) the tolerance for risk. The next steps are structuring the energy consuming portfolio into buying groups and then scheduling the purchases to create a layered system that will allow flexibility to take advantage of market opportunities. The other sections of our website drill down into the intricacies of energy procurement and our approach to solving some of these problems. If instead of reading more, you want to talk directly to a procurement person, please feel free to call: (315) 789-2458.

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