Energy procurement can be a complex task and developing a strategy to manage this process requires the manager to have a high level of knowledge on the matter. However, organisations that wish to keep their financial costs under control should be sitting down to develop a cost-cutting energy procurement strategy.
For businesses which are beginning to develop an energy procurement strategy, today’s blog has been written with you in mind. We’ve chosen five factors that need to be included in a basic energy procurement strategy, of which a sophisticated strategy can then be developed on top of.
1. Track the market and buy when prices are low
Unlike domestic and SME consumers, large businesses purchase energy at wholesale prices. While it’s sometimes unfairly believed that businesses can only purchase when their contract ends, leaving businesses with the pot-luck of purchasing at times when prices are high, this isn’t entirely true. Large businesses can purchase energy in advanced and can take advantage of lower prices when they occur.
2. Compare suppliers and don’t remain loyal
Many businesses reward customers for their loyalty; energy suppliers are typically not one of these businesses. When a business goes to tender for a new energy contract they should consider prices from all suppliers to avoid falling into the trap of increased prices by re-signing with their current supplier (unless the supplier is genuinely offering the cheapest price).
3. Perform procurement in-house or use a consultancy, but avoid brokers
We generally advise against using brokers for procuring energy for two reasons. Firstly, brokers have arrangements with chosen suppliers and don’t tender to all suppliers potentially leaving their clients with an energy contract which is not the cheapest. Secondly, many brokers hide their fees in the price of their clients’ energy contracts, rather than being upfront about how they make their money.
4. Consider service and professionalism as well as price
As with many services, low price and high quality don’t necessarily go together. If your business is in the financial situation where it doesn’t have to take the cheapest option then we would suggest researching the suppliers’ customer service abilities and quality of deliverability to be sure you’re receiving the best value supply (and not just the cheapest).
5. Evaluate and improve
As with every strategy a business develops there will be kinks that need evened out as experience grows. It is vital that a company evaluates their procurement choice regularly and identifies any improvements required. And like all strategies, as the business grows and changes their energy management strategy is one that will need to grow and change with it.
Free energy guide: The Secrets to Successful Energy Procurement
Inside the guide:
- Dispelling common myths surrounding energy contracts
- Strategies business can use to reduce their energy costs
- The difference between an independent energy consultant and a broker