Welcome to Part Four of a five-part series exploring the best practices for engaging the services of an energy advisory firm. So far, we discussed the importance of evaluating the experience (Part One), the full suite of services (Part Two), and the wholesale market expertise of a potential energy advisor (Part Three). In this installment, we will share tips to help you evaluate how well the advisor employs a truly strategic approach to providing energy procurement recommendations for their clients.

Transaction vs. Strategy

First, let’s start with the basic operations of the vast majority of energy brokers in the marketplace.

At a bare minimum, a broker should conduct the procurement transaction for their client. If their client wants to sign a 36-month natural gas fixed-price contract, then the broker goes out and gets them a 36-month natural gas contract. The problem is that too many brokers start and stop here – this is an example of a “transactional” approach to assisting a client. Sure, the broker has fulfilled their obligations to execute what the client expected from the beginning of the relationship – but the broker really has done nothing to assist the client in further improving their energy procurement solutions.

A strategic or “advisory” approach, on the other hand, looks at a host of other issues to bring multiple solutions and opportunities to the table – many of which the client was not previously aware existed. These additional solutions are based on the broker’s in-depth understanding of the client’s future energy usage patterns, their risk tolerance, exposure to the markets where they operate, and other services that intersect with the supply of energy. This pushes the broker into the role of advisor, significantly changing the dynamic of the relationship and enhancing the benefits to the client.

A Holistic View of the Client

To take a strategic approach, an energy advisor must first become a bit of a detective with regards to uncovering and understanding the underlying energy needs and risks facing an organization. Over time, this approach creates more of a trusted partnership between the advisor and the client – as opposed to a very distant relationship experienced with the transactional broker, who is only consulted when the client needs to “book a deal.”

The strategic approach is, at heart, a holistic solution. The advisor takes in to account a number of factors affecting an organization and its particular energy management situation, including:

• Procurement of energy in deregulated markets
• Optimal tariff supply in regulated markets
• Organizational risk tolerance (aggressive vs. risk-adverse)
• Optimization of load profile
• Exposure to peak-demand based utility charges
• Management of energy usage data and spend
• Revenue opportunities from energy curtailment programs
• Organizational challenges to utility bill processing and payment
• Internal/external sustainability goals

This is by no means an exhaustive list, but it provides a glimpse of all the various elements that a knowledgeable energy advisor will understand and must consider when creating a strategic approach to meeting the client’s needs. If the firm you are evaluating or planning to bring on as your advisor is unaware of or unable to address any of these, you might want to reconsider your choice.

Putting the Pieces Together

With the list of energy-related factors we discussed above, it becomes apparent that developing strategic analysis and recommendations involves evaluating much more than what the transactional-based broker is able to provide. But this goes much further than just identifying the factors. An experienced energy advisory firm that specializes in risk management must be able to put all these pieces together to create specific opportunities and solutions for consideration by the client.

In the form of a strategic plan, these well-organized pieces form a comprehensive set of solutions that the client will have at their disposal for implementation based on the organization’s ultimate goals. As is the case with any comprehensive plan, some solutions are implemented immediately, some are slated for future roll-out, and some are ultimately never utilized. As the energy environment and the organization both evolve, previous ideas that were put on the back shelf may now become necessary, and new solutions may emerge that prove to bring value. Only the energy advisor that takes this proactively managed, strategic approach will be positioned to help the organization through this process.

Strategy Separates Advisors from Order-Takers

If you already know what you want, there really isn’t a need to seek out counseling or advice from a trusted source. When you walk in a department store and know what shirt you want, you may quickly brush off the sales associate asking if you need help because you are heading right for the rack. All you need is the person working the register to ring you up. There are many, many “brokers” out there that operate much the same way: They will “take your order” and simply do what you tell them to do.

Is there really any added value in that? Does it make sense to pay for “services” that you’re already handling?

The true role of an advisor, and really the only reason you should engage one, is to broaden your understanding of the solutions available and how these could fit into your organization’s energy procurement goals. The energy landscape continues to change very rapidly. Procuring and managing the energy needs of an organization require a proactive strategic approach to cover all the bases and reveal any new opportunities that further address the ongoing or future needs of the organization. Evaluating a potential energy advisor in light of how well they take a strategic approach to providing solutions is key in establishing a long-term relationship that will benefit your organization into the future.