Ex­pense Re­duc­tion An­a­lysts

The Herald Business - - TRAVEL AND TOURISM - By Lorna Pater­son

As­so­ci­ate, Ex­pense Re­duc­tion An­a­lysts Ef­fec­tively man­ag­ing en­ergy pro­cure­ment

Ev­ery busi­ness needs en­ergy, but many fail to take the nec­es­sary steps to ef­fi­ciently pro­cure this com­mod­ity. It’s easy to see why.

Sup­plier re­newal of­fers come around ev­ery year or once ev­ery 24 months, and time crit­i­cal ter­mi­na­tion or re­newal dead­lines can ap­pear com­pli­cated. These sup­plier com­mu­ni­ca­tions are of­ten filed away with other cor­re­spon­dence and com­pletely ig­nored. At best, this means the cur­rent con­tract will be rolled over at the sup­plier’s of­fered rates. At worst, you may find your con­tract on deemed con­tract rates or out of con­tract rates, which may be twice the pre­vail­ing mar­ket rates.

So, what can be done?

As­tute buy­ers know their con­tract rates, end date and no­tice of ter­mi­na­tion. Once the no­tice win­dow ap­proaches and a re­newal of­fer re­ceived, no­tice should be lodged and an ac­knowl­edg­ment ob­tained so you can seek com­pet­i­tive of­fers. This can take up to four months, and a new sup­plier will need up to 28 days to take over. This process is sim­ple...if your busi­ness has one site. Com­pli­ca­tions mul­ti­ply with mul­ti­ple sites. Imag­ine the com­plex­ity for a busi­ness with mul­ti­ple re­tail out­lets supplied with gas and elec­tric­ity. There are likely to be a hand­ful of sup­pli­ers in­volved each with its own ter­mi­na­tion pro­vi­sions and con­tract end date. Post-con­tract, things don’t al­ways run smoothly. The reg­is­tra­tion process for a new site needs to be fol­lowed closely with clos­ing and open­ing me­ter read­ings for fi­nal billing. The out­go­ing sup­plier can ob­ject to a new sup­plier, and a failed credit check can halt the en­tire process. It’s no won­der or­gan­i­sa­tions find util­i­ties man­age­ment a hot potato. It’s not the glam­orous end of the busi­ness! For large en­ergy con­sumers, the prob­lem is crit­i­cal; fixed re­newal dates mean the busi­ness is forced to lock into sup­ply con­tracts at a ran­dom point in the mar­ket pric­ing cy­cle sim­ply de­ter­mined by his­tory. What other volatile com­mod­ity is pur­chased this way by choice? If you don’t ac­tively man­age your busi­ness’ util­i­ties pro­cure­ment, con­sider en­gag­ing a bro­ker or con­sul­tant to do so for you. Not only might this per­son re­duce your headache but save you money as well. How­ever, be clear the ex­tent of the ser­vice and its cost. En­ergy con­sul­tants are typ­i­cally paid a com­mis­sion by the sup­plier, which brings a price up­lift to your price per kWh. If a bro­ker sug­gests your util­i­ties will be man­aged at no cost, the of­fer is likely to be too good to be true! As long as there is com­plete trans­parency, this ar­range­ment can work well. It comes adrift when hid­den com­mis­sions are added, and the re­sult­ing unit rates bear lit­tle re­sem­blance to cur­rent mar­ket pric­ing. As with all pro­cure­ment,

“Caveat Emp­tor”


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