The South Jersey Energy Blog

How To Choose The Most Effective Energy Procurement Plan

Posted by Rowena Phatak on Dec 10, 2015

Follow these 3 steps to choose the most effective energy procurement plan.If you’re responsible for your company’s commercial energy management, you may already understand the importance of energy planning. The right strategic approach helps you reduce your overall energy costs and save on your monthly utility bill.

Choosing an energy procurement plan is often the most important decision you make as you work to reduce energy costs. Yes, updating your insulation and installing more efficient lighting helps you reduce energy consumption, but your energy procurement plan is the basis of your costs savings.

Choosing the right plan is not always a simple decision. However, when you take the following three steps, you are able to select the most effective energy procurement plan for your needs.

1. Conduct An Assessment Of Your Energy Portfolio

By assessing your energy portfolio, you gain a better understanding of your energy usage. Break down the data you collect by asking some of the following questions:

  • How much are you spending on electricity versus natural gas?
  • How do energy price spikes affect the total cost on your utility bill?
  • How much of your energy comes from regulated markets versus deregulated markets?

Answer these questions, and then determine where you’re able to reduce costs. If you need help understanding your utility bill or assessing your portfolio, you should ask an energy advisor for assistance

 2. Determine Your Risk Tolerance

Your business’s unique demands and goals contribute to what is known as your risk tolerance. Risk tolerance is your ability to withstand large swings in energy prices. Every energy procurement plan must take risk tolerance into account.

It’s helpful to work with an energy advisor to learn more about the appropriate level of risk for your company. A risk tolerance assessment helps you determine what level of energy price volatility your business is willing to take on. To conduct a risk tolerance assessment, you must:

  • Analyze your current energy costs and consumption
  • Review your supplier contracts for termination and expiration requirements
  • Examine your business goals and energy needs
  • Create an energy procurement strategy based on your risk tolerance
  • Identify energy suppliers who offer competitive procurement plans

3. Review Your Energy Procurement Plan Options

Your current energy provider may not be offering you the best deal available. It’s a competitive market, and you need to understand what types of plans are out there. The basic pricing options most suppliers offer fall into the following three categories.

Fixed

You pay a set price for energy supplies agreed upon in a contract. When energy costs rise, your business is protected.

Floating

Your monthly utility bill rises and falls as the cost of energy fluctuates. This option is also known as variable pricing.

Hybrid

A mix between fixed and floating options, a hybrid energy procurement plan allows you to pay a fixed price for part of a contract period and a floating price for the remaining time. You may also be able to apply a fixed price for a percentage of your utility bill, paying the rest on a floating basis.

Once you have compared your energy procurement plan options, you may need help making a decision. That’s why it’s valuable to work with an energy advisor who prioritizes your company’s best interests.

Have an energy plan in place? Take our quiz to see if your current plan is the best one for your business.

energy-plan-quiz