What is Energy Procurement?
Energy procurement enables businesses to proactively purchase energy from a third party energy supplier or local distribution company in order to minimize energy costs. Purchasing natural gas and electricity can be confusing and time-consuming since there are many energy companies offering electric and natural gas supply alternatives.
As your trusted partner, we can help your business take control of your company’s energy spend. Getting the right energy contract can reduce energy expenses, obtain savings, manage risk and secure budget certainty through strategic energy procurement plans.
Benefits of Energy Procurement
Significant Cost Savings
Access to deregulated energy provides competitive rates and lower energy bills.
More Control
Accurately forecast energy budgets and protect your business from market volatility.
Go Green
Choose a supplier that offers energy from more clean, renewable sources.
Electricity Contract Options
Fixed Rate Strategy
In a fixed rate electricity pricing plan, you are locked into a set price lasting the duration of the contract, typically 12 to 48 months, regardless of market fluctuations. A fixed rate strategy:
- Provides budget certainty, stability and predictability of operational costs
- Protection from energy-market price spikes
- Preferable for businesses with a low risk tolerance or those looking for budget certainty
Index Rate Strategy
In a fully-indexed electricity pricing plan, components are passed through to the customer at the market settlement prices. Depending on the timing and duration, index pricing tends to outperform fixed pricing, but at the risk of volatile price swings. Index rate provides:
- Actual wholesale cost of electricity for your specific demand
- Ability to take advantage of off-peak pricing when demand is low
What is Generation Capacity and a Capacity Tag?
When it comes to electricity, understanding capacity helps generators determine how much electricity they need to provide to the grid to ensure that all consumers continue to have electricity available to them. But capacity represents a significant portion, about 25%, of your electricity spend.
A capacity tag is the total kilowatt hours used by your facility on the peak hours of the peak days. Your business is assigned a capacity “tag” that is tied to the number you will require on those peak demand days during the year.
Capacity Tag Management
Capacity costs rose significantly in the past 3 years, with the average effective cost increasing from approximately 1 to 3 cents per kWh and higher. In many cases it can be the second highest component of your overall electricity supply rate behind the raw cost of energy. While capacity costs do begin to drop over the next four years, it is still cost effective to try and reduce your capacity tag. We will work with you on strategies to reduce the impact of that cost component thus reducing your overall price.
Natural Gas Options
Given the volatility in today’s energy market, it is important to manage your budget and your pricing risk. With help from us, you can lock in your natural gas rates with a fixed price or take advantage of a falling market with a variable price.
Fixed Rate Strategy
A fixed rate strategy allows you to lock in a set rate over a designated time for the generation portion of your natural gas bill. Your monthly bill will vary based on your consumption, but the rate you pay per dekatherms will remain constant. Again, this option shields businesses from large swings and unforeseen changes in market prices allowing for price stability
Index Rate Strategy
The basis is the cost difference to move your natural gas from the NYMEX at the Henry Hub in Louisiana, to your delivery point. The basis may be added or subtracted from the NYMEX price.