The Three C’s of Buying Energy in a Competitive Market

Craig Wilson

President | [email protected]

If your business is located in a state with a competitive energy market, then you are in luck.

Your business gets to develop an energy procurement strategy custom-tailored to your unique goals and needs. Done right, this can create real value for your business. Unfortunately, competitive energy is very complex. And making a mistake in just one area can end up costing you significantly more.

Let me be clear, there are some excellent opportunities to buy power right now. And reducing costs could not be more critical. But you need to be careful. Here are three common errors I see companies make that cost them more than they should.

the first ‘c’

Competition

I am a firm believer in the benefits of competition. It promotes innovation in both products and services. More importantly, it promotes competition among suppliers. You stand a much better chance of getting a competitive energy rate when the suppliers are competing for your business than when you buy from just one supplier. This is the first mistake I see businesses make. They get comfortable with their current supplier and end up buying from them exclusively.

The Second ‘C’

Contract Language

There is a reason why energy contracts are so long. This industry is very complex with a lot of moving parts – some regulated and others restructured. The first risk in dealing with contract language is making sure you understand what you are signing up for. Does the contract match the product you are buying? A “Fixed-Price” may not be so fixed in the fine print. The second challenge with contract language is tied to my point above about competition. It is critical that you understand the contract language and that the contracts from each of the suppliers you are working with to create competition are the same.

We call this an “apples to apples” comparison. I see businesses do a great job creating competition but then fail to ensure that prices they are getting are for the same product. The supplier with the lowest price may have a contract that exposes you to more risk. Risk that could have you paying more in the end than one of the higher priced options you received. In the end, if the pricing you are receiving is not apples to apples, creating competition will not help and you could be taking on more risk for what appears to be a great price.

The third ‘c’

Costs

The final “C” is costs. Notice I did not say savings. Not that achieving savings is not important. That is why we are doing this in the first place, right? The key point between cost and savings is how you get there. As I said above, there are a lot of moving pieces in energy and claiming to save you money is a bit tricky. Sure, you may be paying less on this offer than your last contract but that is like trying to compare things done under completely different market fundamentals. Here again is where deciding on savings alone can potentially cost you more. To ensure you get the best deal possible I recommend that you take the time to understand each of the cost components and the underlying market conditions that drive them. This will ensure that the price you pay is fair and gives you a transparent view into how it was built.

Closing Arguments

These are just three examples out of many to show you how complex the competitive energy market really is. Using a broker or consultant can help you navigate these challenges. Even then the 3 C’s above still apply. Brokers/Consultants are never free so know those costs too.

Pay attention to any contracts you sign with them, and they too should compete for your business. I hope you found this information helpful. My team at Breakerbox and I are here to help. Please contact me if you would like to discuss what options may be right for you and how your business can get the most value out of your energy spend.

Brokers/Consultants are never free so know those costs too. Pay attention to any contracts you sign with them, and they too should compete for your business.

What are you waiting for?

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