The majority of industrial and commercial businesses have shopped competitively for electricity supply for the last 6-8 years. Often we humans get into a routine and we stick with it without questioning it … “If it is not broke why fix it?”
Careful adherence to the following three strategies will help an energy buyer minimize their long-term cost of energy:
1) Market Timing
Energy is a commodity and is subject to significant price fluctuations in the marketplace. Just as with any purchase, you want to buy your energy when prices are “low” as opposed to when prices are expensive. Inexperienced energy purchasers often consider new supply contracts only as their existing contract is nearing expiration. Unfortunately that habit leaves the inexperienced purchaser at the mercy of the market. The prudent course to follow is to continuously monitor energy futures for the next opportune time to go out for bid for a future energy supply term.
2) Contract Structure
Electricity has different value depending on both the time of day and season of the year. And there are different choices in terms of how to secure the amount of energy your facility needs at any particular point of time. That complexity results in multiple types of contract structures that energy consumers can consider when buying power.
Many businesses gravitate towards fixed price, full requirements contracts when buying energy because the contract structure is simple, it allows easy comparison between different suppliers or a utility default rate and offers 100% price certainty. Fixed price contract structures have their disadvantages though … in that over the long term they are the most expensive way to purchase your energy. Hybrid type contracts, called structured products, that allow you to lock in energy prices during volatile times of the year but allow some of your energy to by fulfilled out of lower cost spot markets during non-volatile periods, allows energy consumers with significant off-peak energy consumption to realize lower long term prices.
Other organizations are able to react to market shifts so they can secure a more competitive price in real time. Flexible pricing gives them the latitude to choose when they buy energy and how much.
3) Load management
Consumers that have flexible energy requirements have additional potential to lower energy costs. Clients that can curtail load for 2-3 hours at a time can use that capability to reduce future capacity and transmission service needs. Larger institutional and commercial clients with substantial HVAC or chilled water loads can modulate their loads in conjunction with power grid sponsored programs to generate new revenue streams.
It often pays to re-visit your existing contract and energy procurement strategies to be certain you are optimizing your energy spend.