5 ways to lower energy costs

• Published in: Government Procurement Vol. 22; no. 4; p. 8
• Main Author: Wooten, Bob
• Format: Trade Publication Article
• Language: English
• Published: Cleveland Informa 01-09-2014
• Subjects: Cost control; Energy industry; Government purchasing; Guidelines; Market prices; Natural gas prices; United States > US
• ISSN: 1078-0769; 1931-6712

Be Proactive - Don't Wait: The key in a rising market is to be prepared to act sooner rather than later. This is never more apparent than when discussing the energy markets. From a government procurement standpoint, the normal course of action is to wait until six months or so prior to expiration of a contract to start procurement. However, in this type of market, chances are that you will find your greatest opportunities for savings by procuring as much as 24 or even 36 months ahead of the expiration of the current contract. Unfortunately, nobody owns a crystal ball to know for certain what energy prices will do in the future, but we must make as educated a choice as is possible by combining historical movements with daily wholesale market price intelligence. When this points to a rising market, it provides budget certainty and assists in risk management to act early to secure savings. Continually Monitor the Markets for Opportunities: Even though a market is rising, it doesn't mean that it is a smooth upward trend line. The exact opposite is true - you will see large spikes and dips in this upward path. The same exists if the market is trending down. This is all part of the incredible volatility seen with energy commodities, especially electricity and natural gas. So, even though your entity may have decided that it will act early and decisively to renew its energy contract, thereby providing budget stability and protection, you still need to be constantly monitoring market movement to make sure agreements are inked during favorable pricing windows. This means that you don't sign a contract during a price spike. While that seems an obvious thing to say, it is impossible to implement unless you are closely connected with the market - and wholesale market intelligence specifically. Only through the best educated interpretation of wholesale market price movement will your organization stand the best possible opportunity to secure that energy deal during a dip in prices - regardless of which direction the market is moving.