While finding the best energy contracts for your business' needs can be challenging, energy management procurement goes a long way in helping you find value for your money. Gaining a deep understanding of the process enables you to utilize it better and reap its many benefits.
Summary
- Energy procurement is sourcing electricity or fuel for a business from private retail suppliers.
- Businesses have more control over energy costs and find suppliers that meet their specific needs at affordable prices.
- Small businesses, commercial organizations, schools, nonprofits, governments, and data centers are just some businesses that can benefit from energy procurement services.
In this article, we will tell you all you need to know about business energy procurement, from what it is and how it works to how it can benefit your business.
What Is Energy Procurement?
Today, more and more states are rolling back their energy restrictions, offering businesses alternatives to the utility company-monopolized contracts. These rollbacks mean you can now source your energy or fuel from private retail suppliers.
Energy management procurement refers to sourcing the electricity or fuel your business needs. Utility procurement is another common term you might come across, which refers to the process businesses use to search for the most favorable energy contracts.
Since different businesses have varying energy needs, these processes help you find suppliers who offer solutions that meet your business’s specific energy needs at affordable prices.
Why Business Energy Procurement Is Important
There are several reasons why energy procurement is essential. The right commercial energy procurement strategies can help you save money and make your business more profitable.
The process also allows you to have complete control over with whom you contract to get the energy your establishment needs and the establishment’s energy expenditures.
Additional Read: Is Energy Procurement For Data Centers The Key To Saving Money? (Hint: Yes)
Benefits of Energy Management Procurement
- More Control: Efficient procurement strategies give you more control over energy costs and contract terms.
- Savings: Searching for suitable deals helps you secure lower rates and save money.
- Greater Reliability: An energy procurement strategy gives you detailed insight to anticipate a consistent and predictable energy bill.
- Efficiency: Partnering with the right energy supplier can help your business achieve greater efficiency.
Who Does Energy Procurement Benefit?
It is almost impossible to think of a business that could not benefit from energy procurement services. After all, all companies have overhead energy costs. Finding favorable packages can reduce these costs.
Some of the businesses that could benefit from utilizing this process include:
- Small businesses
- Commercial and industrial organizations
- Schools
- Nonprofits
- Governments
Energy management procurement offers you the analysis and research you need to ensure you get the best possible deal. Whatever your business, energy procurement has the potential to save you money.
How Does Energy Procurement Work?
Energy procurement processes vary according to the size of your business and the resources to which you have access.
The process can involve comparing and working directly with potential energy suppliers and testing your available options. Unfortunately, this process is slow because of the time you will need to research the best deals.
Alternatively, you can turn to the professional services energy procurement companies offer. These companies will provide you with access to energy management brokers and consultants who will find the best deals for you.
Entities Involved in the Business Energy Procurement Process
Depending on your approach, four entities are involved in the energy management procurement process. These entities include:
- Energy Customer: This is the business or person purchasing energy or fuel.
- Energy Supplier: This can be a private, retail, or wholesale company that provides energy to the customer. The supplier determines the contract rate and term.
- Utility Company: A utility company is responsible for distributing energy to customers and servicing emergencies and outages. Some companies generate their own energy, while others purchase it from independent power producers.
- Broker: This is the intermediary responsible for negotiating contracts between customers and suppliers.
How Do Companies Procure Energy?
A company’s first step when procuring energy is looking for a suitable energy supplier that offers practical solutions and competitive pricing. Companies generally tend to deal with brokers, suppliers, and utility companies during this procurement process.
The broker will work with your company’s energy procurement manager to understand your energy needs and goals. Afterwhich, they will develop a procurement strategy, negotiating with suppliers to find contracts that will meet your company’s energy initiatives.
You can also work directly with suppliers, picking one that can deliver personalized energy solutions at competitive prices.
Should you choose to do nothing, your local utility company will be your default supplier, either charging a set rate for a specific period or a market-based rate, which changes monthly.
The Different Types of Energy Contracts
While there are multiple ways you can structure your energy purchasing contract, the following are some of the primary contract types that exist:
Fixed Contracts
These energy contracts lock in a rate for the energy you receive over a specific period. Since you pay a fixed rate regardless of market fluctuations, these contracts enable price stability, easier budgeting, and predictable billings.
However, you will miss out on potential savings should energy market prices go down.
Variable Contracts
These contracts contain bill-to-bill price changes that reflect the market’s trends. They are ideal if you are willing to risk price increases to capitalize on potential savings when the prices dip.
Blended Contracts
Blended contracts combine variable and fixed rates, providing a comfortable level of predictability while enabling you to benefit from cost reductions.
For instance, your business could lock in 60% of its energy consumption at a fixed rate and leave 40% to variable rates. Doing so would mean price decreases, and increases would only impact 40% of your usage.
Professional Energy Management Procurement Services
While businesses have varying energy needs, not all know they have a choice about where to source their energy.
Navigate Power is a consulting firm consisting of professional engineers and industry professionals who dedicate their expertise to providing personalized energy contracts that satisfy your business needs.
We combine our years of experience with the relationships we’ve built with leading retail natural gas and electricity suppliers to deliver effective and competitive energy products and services. Contact Navigate Power today to learn more about our energy management procurement services.
