In our previous installment, we started a five-part series with advice for the energy buyer when engaging an energy advisory firm to assist with the procurement and management of energy supply. We highlighted the five key factors to consider:
- Full-Service Solutions
- Wholesale Market Expertise
- Strategic Approach
- Independent Status
We initially discussed how important “experience” is in evaluating and hiring an energy advisor. Now, we will turn our attention to the need for “full-service solutions.”
As with all of the key factors, it is important to first define what we mean by full-service solutions. It is a good idea to take a step back and view energy as a whole, as it relates to the financial effect on your organization. It stands to reason that, any time an energy advisor is hired, the end goal is to save money and lower annual energy budgets. This then fits nicely in to two buckets: supply-side solutions (procurement & billing) and demand-side solutions (energy efficiency projects). “Full-service” refers to the full offering of solutions in the supply-side bucket. In an upcoming installment on the importance of the “Independent Status” of an energy advisor, we will talk about the inherent conflicts of interest created by combining supply-side and demand-side energy services through one provider. So as we discuss here, full-service solutions do not – and should not – include demand-side offerings. Rather, you want to focus on an energy advisor who can provide the complete range of services with regards to the supply side of energy procurement:
- Energy Market Research
- Contract Management (bill verification, account switching, meter energizing, etc.)
- Energy Data Management
- Utility Bill Processing and Payment
- Rate Analysis & Bill auditing?
- Curtailment Programs
- Green Energy
- Client Education
Let’s touch on each of these issues briefly and then discuss how, collectively, this addresses the holistic needs of an organization’s energy supply and budget concerns.
In the energy world, the only good decision is the well-informed and educated decision. Understanding not just where market prices are but why they reached their current levels is crucial in establishing an energy procurement strategy and then executing that strategy. The best-positioned energy advisor is one who is directly involved in the transactions taking place in the wholesale market, so that the resulting market research is based on that primary source intelligence – resulting in the most educated decisions when securing energy rates. Anything short of this, and the chances of making incorrect decisions dramatically increase.
It almost goes without saying that, if you are going to sell a product, you also need to service it. If an energy advisor procures an energy contract for you, they should also be there to handle all the intricate issues involved in managing that contract throughout its life. When looking at contract management, typically 20% of the time is spent on the initial procurement and 80% on the long-term management that includes such factors as reviewing bill accuracy, adding/deleting sites, and interceding with the supplier and utility as accounts change. If your advisor is not supplying these services, you truly are being cheated.
Before you can procure energy, you must understand how and when you are using energy. A quality data management system will give you real-time access to not just energy usage, but also energy spending. Data management solutions begin to differentiate themselves when you see that superior systems allow the user to produce budget estimates, research market conditions, and even calculate energy cost per square foot for your facility. Hiring an energy advisor who can’t provide such services within their management system would be a huge mistake.
Utility Bill Processing & Payment
While not implemented by every organization, bill processing can be a crucial part of making an overall operation very efficient. These solutions can range from just auditing all bills on a monthly basis and providing a report by which payment can be made, to actually reviewing and paying every bill to reduce your individual payments dramatically. Bill processing solutions can incredibly streamline accounts payable, which can allow you to divert resources to other key critical areas.
Bill Auditing & Tariff Rate Analysis
Energy procurement solutions allow energy users to control the cost of the commodity in those areas where that commodity is deregulated. However, even if you are able to procure a lower commodity rate, you may have zero effect on your regulated delivery costs. In addition, your organization may have many locations that are still in completely regulated areas where a procurement mechanism isn’t an option. A key piece of the puzzle in reducing costs is hiring an energy advisor with the skills and experience to audit your rates and identify the steps you can take to reduce those rates. In addition, a good rate analysis may also identify areas where you have been overcharged, resulting in refunds from your utility.
In many areas of the US, the utilities sponsor programs that will pay customers for “being on standby” to reduce energy usage during times of strain on the energy grid. This is to avoid potential blackouts by reducing the demand before systems fail. Most of these programs are administered by competitive “demand/curtailment response providers.” An experienced energy advisor will also be able to sort through this landscape to ensure that your organization is receiving the most in revenue for participating in these programs.
Especially in the government realm, sustainability and “green” procurement goals are a key part of being responsible to both society and your citizenry. Energy is one of the crucial areas where you can meet sustainability goals by procuring green energy. An energy advisor who can not only assist in buying green energy but direct you to solutions where you can produce your own energy will quickly become a key ally in your efforts to better the environment while lowering your energy costs.
We mentioned earlier the need to be educated and informed. You will want to look for an energy advisor who keeps you, as the client, informed along the way. You never want to be in a situation where you feel completely in the dark, just following their recommendations because you don’t have all the information. A good advisor will provide the background education, enabling you to understand the discussions and make an informed decision. Client education can take the form of research papers, webinars, and even customized seminars.
The Soup and the Nuts
After reading this, it may appear that the procurement of energy is an afterthought compared to all these other services. Nothing could be further from the truth. Procurement is the mechanism utilized to directly address the rates you pay for the energy you use. But all of these other services tie back in to the purchasing, management, and use of the commodity on the supply-side of energy as it affects your organization. Engaging an energy advisory firm that does not have the experience and capabilities to provide all of these solutions means that you will never have a holistic strategy applied to your supply-side situation. The result? You could be leaving many cost-saving opportunities on the table. So, when evaluating energy advisors, be wary of firms that can’t provide full-service solutions.