Commerical Energy
In today’s competitive business environment, controlling and managing energy costs is not just an environmentally responsible decision, but also a critical business strategy. Energy costs can significantly impact a company’s bottom line, and effective energy management can lead to substantial savings and increased profitability. Energy procurement is a critical aspect of business operations, particularly for companies with significant energy consumption. It involves the strategic acquisition of energy resources at optimal prices and terms.
The Impact of Energy Costs on Business
Energy costs often represent a significant portion of a company’s operating expenses. These costs can fluctuate due to various factors such as market dynamics, geopolitical events, and changes in energy policies. Such volatility can make budgeting and financial planning challenging for businesses. Energy procurement plays a pivotal role in managing a company’s energy costs and ensuring a reliable supply of energy. It involves not only purchasing energy at competitive prices but also understanding market trends, negotiating contracts, and managing risks associated with energy price volatility. This is where we come in.
Benefits of Effective Energy Procurement
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Cost Savings: By procuring energy strategically, businesses can achieve substantial cost savings. This involves purchasing energy when prices are low and capitalizing on various energy procurement strategies.
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Budget Certainty: Energy price volatility can significantly impact a company’s energy costs. Through fixed-price contracts, businesses can achieve budget certainty, making it easier to plan and manage finances.
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Risk Management: Effective energy procurement involves managing the risks associated with energy price fluctuations. This can be achieved through various hedging strategies.
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Sustainability: Businesses can enhance their sustainability efforts by procuring renewable energy. This not only reduces their carbon footprint but also improves their reputation among stakeholders.
Energy Rates are Determined by Several Factors:
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Load Profile: This shows your daily and seasonal patterns of energy consumption, based on your historical usage data.
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Historical Usage Data: This is a file that contains your energy usage and demand for the past year. Retail energy providers need this file to give you a quote for your commercial electricity rate.
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Energy Demand: This is your maximum energy need during a 15-minute interval from your previous month, measured in kW. This measurement is needed to ensure they have enough supply to meet your highest demand.
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Energy Usage: This is how much energy you consume, measured in kWh. Your monthly energy charge is based on your energy usage times your rate. Your energy rate is negotiable, but your demand charges are not. Your energy bill total is the sum of your energy, demand charges, and taxes.
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Contract Start Date: Your energy rate varies dependent on your start date and other factors affecting the market at the time. These factors are supply and demand, world events, and weather. Usually, long-term rates are lower than short-term rates. So, it is usually better to sign long-term contracts early before your current one ends.
Energy Procurement Strategies
Several strategies can be employed for effective energy procurement:
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Fixed Price: This involves locking in a specific price for energy for a set period, providing budget certainty.
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Index Price: This strategy involves paying the market price for energy, allowing businesses to benefit from price reductions.
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Hybrid: This strategy combines elements of both fixed and index pricing, providing a balance between budget certainty and market opportunities.
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Load Following: This strategy enables you to lock in non-energy costs and strategically layer fixed energy purchases. By doing so, you distribute price risk across multiple percentage-based transactions.
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Heat Rate : This strategy is a way of calculating the cost of electricity based on how much fuel is needed to produce it. A heat rate energy strategy allows customers to have more transparency and flexibility in their electricity prices, as they can lock in the gas price component or let it float with the market.
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Empower Your Mind: A Guide to Navigating Energy Rates and their Contracts!
The # 1 option best suited for most companies
FIXED-PRICED CONTRACTS
​INDEX-PRICED CONTRACTS
HYBRID-PRICED CONTRACTS
LOAD FOLLOWING-PRICED CONTRACTS
HEAT RATE CONTRACTS
"The objective of deregulation is to offer energy customers greater choice, both among suppliers and services. Ideally, that will result in increased efficiency and dollar savings. But savings do not come automatically; the consumer must make a choice." (Source; US Dept. of Energy)
