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PRES Services

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

Energy Procurement Challenges

Developing Your Objectives

Many CFOs, Operations Managers, Senior VPs, and Corporate Purchasing personnel face numerous day-to-day challenges and unlike other commodities, energy will continue to flow to your facilities almost regardless of what you do. Whether its toilet paper or stainless steel bolts, these items (unlike electric and gas) will not arrive at your facility or production process unless you order them. Once on-site, there is internal inventory, scheduling, and distribution to manage (not to mention getting the best price). So, it is understandable that many corporate managers spend less time with their energy purchases than they do with other commodities they manage. Some purchasers may reasonably decide that the best approach is to stick with a simple process and contract for commodity energy over a 24 or 36 month time frame, sticking the cost in the budget, and reserving their time and resources for other, more pressing issues.

If however, there is a deeper concern for managing energy resources or a firm is heavily dependent on commodity energy costs as a large part of its production inputs, then there are good reasons to commit more time to the energy procurement effort including:

  • A corporate desire/program to control all costs.
  • A desire to reduce energy market risk.
  • A concern that a prudent energy purchasing strategy and operation would require more time and expertise than is available in-house to do a responsible/complete job.

Getting Good Advice

There are a lot of "energy consultants" these days. Many offer services for a portion of what you need. Some understand energy but are promoting a single vendor or program; others might understand your business but are not specialists to energy supply, still others treat energy as a product that can be purchased on-line. You need an advisor who is qualified and reputable, has experience with critical elements of energy supply, and understands the energy marketplace so that you receive the proper support. Finally, you may need someone who is backed up by an experienced team who not only can support procurement, but who understands how customers use energy and can identify strategies to improve utilization and reduce waste.

Obtaining Competitive Offers

Soliciting competitive quotations for supply is a small part of what an energy consultant does. Before that step,we identify and screen potential providers to assure a reasonable and fair response and only from reputable sources. It is also imperative to spend some time with each potential supplier to obtain ideas as you develop your request for pricing and also to keep them interested in pursuing your business.

We prepare a request to solicit pricing (whether formally or informally), including information on your various utility accounts, energy types, purchase duration, and what types of pricing options you will consider. Even when you ask for the same thing, it is common to see a number of nuances in price representations and slightly different contract conditions from supplier to supplier. An exercise we call “aligning” should assure that we are comparing apples-to-apples.

Understanding the Market

After getting a supply contract in place, it is prudent to monitor market developments and prices to possibly identify additional opportunities to re-let or extend the contract. Managing a robust energy procurement program takes some dedicated staff time with the affinity to research and understand the broader energy market. Ideally having a plan with a flexible buying strategy based upon your objectives and a trusted advisor to serve up alternative supply options for consideration may be the best risk management strategy.

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