How Businesses Can Avoid The Pitfalls Of Energy Purchasing

Mark Alston, General Manager of ENER-G Procurement discusses four fundamental rules to reduce energy purchasing costs in business.

Warwickshire (I-Newswire) September 29, 2012 - Energy purchasing has become a boardroom issue for businesses as rising energy prices and evolving environmental legislation takes effect.

Understanding the volatile wholesale energy market, negotiating with suppliers and choosing the best contract type are serious challenges. At the same time, cost reduction is of prime importance to ensure competitiveness.

ENER-G advises that businessescan apply four key principles to manage energy purchasing:

1. Plan Ahead

Many businesses are unaware that they can set-up new contracts well in advance of their current ones coming to an end. Often they wait until their renewal is approaching to get prices, which may not be when the wholesale market is most favourable. Such failure to plan ahead can prove to be a costly mistake, as opportunities can easily be missed.

2. Timing is key

A good energy procurement consultancy will monitor the wholesale market well in advance of their clients renewal dates and identify the best time to go to market. Whether they choose a fixed price deal or one of the increasingly accessible flex type contracts, timing iskey to getting the best price.

ENER-G Procurement 'sfree Bespoke Market Tracker service helps businesses monitor developments and spot opportunities to secure prices for their next contract. The weekly report predicts a company’s renewal prices based on the current wholesale market prices.

The market remains volatile and is prone to increases over the medium term. Businesses should, therefore, plan ahead now even if they aren't due to renew contracts until late 2013 or 2014. The Market Tracker reports provide companies with the specific intelligence on wholesale energy costs to fix contracts in advance at the best possible rates.

3. Understand suppliers' Terms and Conditions

While wholesale energy costs account for the largest portion of energy bills, other pricing elements, such as network operator charges and contractual risks, also need to be factored in.

Suppliers' terms and conditions are increasing in complexity and constantly being updated to pass more risk back to customers for other charging elements. This is making it increasingly difficult for organisations to understand the terms they are being offered in order to make like-for-like comparisons. Working with a specialist like ENER-G can add value in explaining the details of each offer, and pointing out any risks to be aware of, e.g. volume variations.

4. Don't get caught by 'out of contract' rates

Another potential pitfall in energy purchasing is getting locked into expensive ‘out of contract’ tariffs. Many businesses fail to meet the deadline for terminating their energy contract and get locked into ‘out-of-contract’ tariffs.

Some suppliers require 90 days notice or more. Failure to meet the termination deadline can result in suppliers rolling-over the contract onto a higher price or charging 'out of contract' rates. Both can result in paying up to 50% more for as long as 12 months. ENER-G provides a free contract renewal reminder service to help businesses avoid this costly mistake.

ENER-G Procurement is an independent energy purchasing specialist and a founding member of the Utilities Intermediaries Association (UIA). ENER-G works with manufacturers' organisation EEF to provide the EEF Energy Services, and operates the Chamber Utilities™ service to Chambers of Commerce across England.

For further information or to register for a free weekly Bespoke Market Tracker report, contact: em@energ.co.uk, 01527 855088,www.energ.co.uk