FEATURE PURCHASING UTILITIES
NINE REASONS TO CONSIDER your next energy contract now
percent margin. Therefore, they have to be selective on their clientele in order to earn a decent profit. Show your current supplier and potential new ones why you would make an ideal client. Marketing your business as an attractive
client ahead of time provides the opportunity to maximise bids from potential suppliers for your business.
Nick Linklater at ENER-G Procurement explores nine reasons why waiting until your energy contract expires could cost you more
M
any businesses fall into the habit of delaying review of their current
contracts or investigating their renewal options. When they finally get around to it, they are often too late to make a difference and are forced to pay higher market prices as they run out of time to investigate the best deals. Here are nine reasons why you need to investigate your next energy contract now instead of waiting until it's close to expiration:
1. It’s one of your largest overheads According to the Office for National Statistics, retail electricity prices have doubled in the last 10 years while natural gas prices have nearly tripled. How often does your company review its benefits, costs, raw materials suppliers, and equipment leases to ensure it’s getting the best deal? Energy is often overlooked, but outside of the cost of labour, it’s likely to be one of your largest expenses. Therefore, your energy budget may have the largest amount of room for cost savings.
2. Timing is everything The wholesale energy market is volatile. A volatile market presents opportunities to buy lower cost energy when prices dip. But there is an equal risk of having to pay a premium during a peak period. Waiting to purchase energy until the expiration of your current contract minimises your options; you have to buy energy at the going rate at that moment, even if it’s at a
18 SPRING 2014 | ENERGY MANAGEMENT
peak level. When you plan ahead, you can often wait until the price fits within or even below your budget before locking into a contract.
3. Swapping suppliers takes planning If you’re looking for the best value deal you will need to search the market. Business customers must give adequate termination notice if they wish to swap suppliers. Researching new suppliers, comparing offers and negotiating the best price also takes time. You therefore must act at least sevenmonths ahead of your current contract’s expiry date.
4. Avoid automatic renewals If you fail to renew your existing energy contract or switch to a new supplier, you can easily find your business locked into uncompetitive, out of contract (or rollover) tariffs for as long as 12 months, paying more than 50 percent above standard rates. Automatic rollover: Businesses pay more because their utility contract gets automatically renewed without negotiation.
6. Develop a risk management strategy An energy risk management strategy establishes your objectives, limitations and preferred approach to buying energy. Once established, it forms the framework for all purchasing decisions, helping your energy supplier spread the risk and protect against market volatility.
7. Take time to check T&C’s Suppliers' contractual terms and conditions are becoming more and more complex, as they add clauses that allow them to ‘pass-through’ additional third party charges during your contract term. You need to take the time to understand the small print of your T&Cs and their consequences, to enable you to make the right choice.
8. Your business is changing If you have recently undergone energy
saving initiatives that have consequently reduced your energy usage, you may need to renegotiate your minimum tolerance levels on renewal. Make sure your next contract considers the changes occurring in your business.
“If you fail to renew your existing energy
9. Understanding contracts Ensure you research your options and understand the difference between a fixed, flexible or a collective product. By taking a proactive approach to
contract or switch to a new supplier, you could find your business locked into
uncompetitive, out of contract (or rollover) tariffs ...”
5.Market your business as an ideal client On average, energy suppliers earn a 6
buying energy, you can better control your costs. Find out how you can cut costs
and meet your carbon targets. Download your free eGuide now:
Monitoring and targeting: The energy manager’s guide to consumption management ENER-G Procurement
www.energ-group.com/energy- procurement-brokers
0844 225 1168 Enter 205 / ENERGYMANAGEMENT
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