Energy Procurement Services
Energy Procurement Services
Energy Procurement Services Proactive supply management strategies
Commercial energy procurement experts providing fast, transparent sourcing that gets closer to wholesale utility prices. Improve both quality and timing with our exclusive supply agreements and custom software.
Balance Risk & Reward
Utility and energy procurement professionals recognize that when buying a commodity two things determine their success – the quality of their decisions and luck. In other words, the better the decision mechanism, the less luck you need for exceptional results. Therefore, Vervantis focus on both the structure of supply agreements and the wholesale pricing smarts you need to make buying decisions more effectively. By applying our knowledge, market analysis, proprietary software, and risk management tools, energy purchasing decisions become dynamic with predictable outcomes every time.
Our sourcing experts negotiate advanced tendering, pricing and contracting options with commercial energy suppliers. These unique supply agreements allow business energy procurement strategies to be precisely matched with the objectives and risk profile of your organization.
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Energy Procurement Services - Make Smarter Decisions
Energy procurement is more complex than signing a contract and hoping you’ve made the right decision. It takes a lot of research and, even more importantly, an understanding of the energy and utility landscape.
For businesses, the way utilities are handled will inevitably influence how much money is spent and how much energy is saved — two things that can drastically change the fiscal outlook.
Therefore, to understand the best contracting options, our energy supply experts start with detailed energy data analysis through our energy management software DataHub360™. Once we know how and when you are using energy, we carefully consider your energy purchasing goals, energy suppliers, regulated utilities and wholesale energy prices.
How hard will your advisor look for the best price?
Commercial energy suppliers provide many different pricing options, but few energy procurement advisors have the tools or commodity smarts needed to evaluate or take advantage of them. In conclusion, most will recommend fixed price agreements as this is the easiest contract for them to place – but is this the best fit for your business?
A Transparent and Proven Process
First, our energy sourcing experts provide energy professionals with direct access to wholesale energy prices and work with them to better plan market timing. After that, we work with commercial energy suppliers on multiple levels to intelligently segment bids. This increases competition and attracts lower energy prices. Thirdly, and most importantly, every bid is analyzed by our regulated energy sourcing team and compared with local utility companies to make sure you buy energy at the lowest possible rate.
What Are Dynamic Supply Agreements?
Using SourceRisk ™, a proprietary dynamic risk management solution, Vervantis calculate energy commodity risk values daily, recommending both fixing and unfixing decisions to match a companies risk profile precisely. Exclusive energy supply agreements allow this flexibility improving both the quality of decisions and sourcing results.
Want More Information?
No problem. There is more information below and we have written a guide to energy procurement that explains some of the considerations in managing an energy RFP yourself or if using a third-party, guidance on the different types of support. You can read it here.
Energy Procurement Demands Expert Attention?
Energy prices can be fixed and unfixed in a controlled environment using the same processes found in banks and energy suppliers. This dynamic process facilitates better optimization and control of energy wholesale prices with Value at Risk (VaR) calculations applied daily to ensure decisions follow approved guidelines.
Transactions are still made with commercial energy suppliers using the same type of supply agreements companies use now.
Utility Price Analysis
Utility companies have no obligation to make sure you are always on the best rate. However, Vervantis sourcing professionals leave no stone unturned in the pursuit of lower energy prices. Our corporate energy procurement team have developed an exacting process to accurately compare consumption with every available rate from every utility company across the United States. XLR8™, a proprietary rate analysis tool cleans and profiles utility data to hunt for the best energy rate options from more than 11,000 rate options.
If you’re still evaluating energy procurement decisions based on outcomes and hindsight – Its time to talk to our team.
How To Buy Energy: A Guide To Commercial Energy Procurement
If you are a category buyer responsible for indirect procurement, you probably already know that commercial energy sourcing, being a commodity, is unlike most other indirect spends. The volatile nature of underlying wholesale utility costs makes continual monitoring a prudent practice to avoid cost shocks and take advantage of market opportunities.
Energy consumers can, and do, buy energy directly from energy suppliers but many find the services of an energy consultant or broker an effective way to streamline the procurement process with tools, resources and expertise. Whichever route you take, this article will help you better understand the process of buying energy and hopefully leave you better informed about the choices available for program management.
1. Do you really need an advisor to buy energy?
As energy advisors ourselves, you might expect our answer to be yes, but actually, that’s not always the case. Most organizations we talk to already have very experienced well-qualified procurement specialists, who are very capable of sending out an RFP and negotiating responses to obtain an energy supply contract. Outsourced advice increases in value with the size of the problem you are managing, and the time available to manage it.
Generally, it all boils down to scale. How much energy is being purchased? How many facilities need to be bid-out? How many energy markets need to be evaluated? … and so on. The larger the number of sites, the greater the administration burden to measure, manage and report. The larger the energy spend, the more important it is to have your procurement strategies set to manage the commodity risk and the timing of transactions.
Energy advisors providing supply management services, are by their very nature, typically more active in the energy markets, monitoring every day rather than once or twice a year so more likely to know when to buy. They will typically be able to engage more suppliers and know how to present information to encourage more RFP responses. They should also be better able to advise on the most advantageous supply terms for your energy sourcing programs.
Good third-party advisors invest in people, tools, technology, and real-time market data to keep you informed and make sure you’re buying energy intelligently. These specialist tools and resources really streamline energy procurement but are rarely cost-effective for most companies to provide in-house, strengthening an outsourcing argument.
You can usually find a list of commercial and insutrial electricity and natural gas suppliers in your area using a good web search browser or via your Public Utility Commission who have a list of licensed suppliers and advisors.
In short, whether you decide on in-house or outsourced support, the more important and resource intensive your energy spend, the more it’s worth investing in a process that streamliines the purchase, risk management and administration of your the utility spend.
2. Evaluating Support – Broker or Consultant?
Energy Brokers typically conduct a one-time procurement exercise. They will shop the market either exclusively for a client or by aggregating your volume with others and place the contract with the cheapest supplier at that time. They normally take their fee or commission as a % of the unit rate they negotiate, this is often referred to as a back-end fee.
Brokers continue to earn their fee on every unit of energy you consume for every year of any contract they place, so using them to secure a three-year supply contract could, if your volume is large, earn them hundreds of thousands of dollars for multiple years for a single procurement exercise. Be aware that because this fee mechanism only works in deregulated (direct access) markets, brokers will not compare open market/direct access supplier rates to local utility rates – which can at times be cheaper.
Also, energy brokers are not known for providing ongoing support, reporting or evaluation of your position and few will invest in online technology to provide ongoing updates or administration.
Energy Consultants provide a more holistic service. They will look at more supply contract options, compare competitive rates to your local utility rates and continue to evaluate your positions through detailed analysis and reporting. They should also evaluate all RFP responses and compare to rates in regulated markets where there are often rate options that could save you money.
The fee structure is also different, rather than back-end fees, it is more typical to see transparent monthly retainers, often with performace elements attached. This model allows energy consultants to be more easily integrated into your business and work as an extension of your team providing ongoing advice and support on a range of energy topics, not just procurement.
It is always a good idea to speak to a few energy consultants and advisors to find out who can offer the range of support you need and see who provides more than just fixed-price supply contracts. Canny buyers understand that commodity markets move up and down, so having tools that work in both directions brings enormous value.
Vervantis use value-at-risk processes for clients that measure and control the price risk of procurement accurately. In simple terms if markets go up, more volume is fixed to protect your position and if markets fall you can unfix and participate in falling prices, transferring extrinsic value to intrinsic value in the process. Because everything is transacted through a physical supply agreement, the process will always meet normal accounting treatment.
3. Evaluating Energy Suppliers
Do your research well on competitive energy suppliers that are able to price your energy requirements. The price you get is only as good as the creditworthiness of the supplier who provides it. If the supplier fails so do you, so always check their financials.
Vervantis has a 70 point checklist to evaluate energy suppliers from its quorum of over 180 vendors in North America alone. It is unlikely a company would want to evaluate such a large pool of vendors on its own, so you might want to choose a smaller number active in each market you are buying for, taking time to carry out due diligence on the list list to confirm their viability for inclusion in the RFP.
Checking vendor financial information from Dun & Bradstreet helps and make sure you understand their company structure, how long they have been in business, the type of clients they have and whether they have a footprint that matches yours. Get references from their clients, some new and some more established to get a feel of how they are likely to treat you over time.
Check the flexibility offered in their supply agreements to allow you to add or remove sites or use more or less energy than expected? Suppliers will normally be willing to negotiate some of these areas provided you have an attractive load, brand and good credit rating.
4. How Do I Conduct an Energy RFP?
Thinking through the what-ifs in advance is a good place to start when building your energy sourcing strategy and find vendors that will align with your energy procurement objectives to help you manage purchasing risk more effectively. Try to plan energy procurement far in advance of your existing contract expirations. The closer you buy to an expiration date, the less opportunity you will have to find a great price. Rather than being able to analyze prices objectively and pick your time, you become a price taker who must transact – never a healthy position to start negotiations.
Look at the wholesale energy markets to understand the price evolution and see if now is actually the best time for you to transact (if you don’t have any access, you can view them for free here) and if the timing doesnt work, investigate an extension.
It is worth taking some time to consider the impact energy prices could have on your business. How much is the energy spend as a percentage of your cost base? How quickly can you respond to utility price changes? How will changes affect your product pricing or profitability? How long before cost changes can be passed to customers? Do you need renewable energy? and so on.
Always compare the price you get from competitive energy suppliers with rates available from your local utility company, they could be cheaper. This is rarely checked but can offer significant savings.
Allow plenty of time for your RFP. Energy suppliers will want to gather your usage data from your utility company(s) to make sure they price your load accurately. The process of pulling utility data can take a number of weeks, so again, do not leave everything to the last minute or you will significantly reduce your options to get a competitive price.
It is good practice to manage your usage and demand whenever possible, something you should address with your facilities or operations team regularly. If your usage is erratic, that is harder for a supplier to predict so you can expect to pay a higher price than if you had a more stable, flatter consumption profile.
5. Finalizing the Agreement
Be sure to have all your internal legal approval and sign-off processes aligned after you have negotiated supply terms, supplier pricing is typically only valid for a few hours – they won’t hold a price beyond this. It helps to brief those with signing authority on what is coming and make sure that any procedures or compliance steps that need to be completed are understood in advance.
When your agreement is in place, do not forget about it. Keep an eye on the energy markets and see how prices are changing in the future. Conduct data analysis to get a better understanding of influencing factors on price and monitor the impact of price changes and usage to your budget. Keep the finance team regularly appraised with position reporting in case they need to make adjustments to the business plan.
6. Get Help Where You Need It
If you want to start buying energy yourself but need help with any of the areas above or any part of your energy procurement process, we are here to help. Vervantis pride themselves on providing proactive strategies for energy procurement through our suite of outsourced, on-demand solutions. Nothing is too small for us to help you with – just ask.
If you have questions or need more guidance just drop us a line and one of our specialists will be happy to help. You can contact us here
SourceRisk™ is a proprietary risk management solution for energy professionals that accurately measures price risk and keeps it in the range you allow. After that, we use flexible dynamic supply agreements, which enable organizations to avoid volatility by fixing volume if markets rise and unfixing it if they fall.
We create a strategic energy sourcing environment with supply contract structures that streamline and centralize decision making. Above all, our corporate energy procurement experts ensure organizations can act quickly on advice and intelligence across all territories.
Our commercial energy experts use proprietary rate analysis models which accurately analyze and compare thousands of regulated utility rates against your facilities load profiles, creating savings recommendations in hours. This regulated energy sourcing solution provides unrivaled access to lower energy prices.
Vervantis provide free direct access to energy data analysis through our proprietary energy management portal DataHub360™. Organizations can view Sites, Accounts, Master Agreements, Energy Contracts, Site Pricing, Energy Reports, Sustainability Performance, Invoices and Utility Bill Management programs.
Firstly, timing and readiness to transact are always important factors in commercial energy procurement. Above all, buying energy when it’s cheap rather than at contract expiration is vitally important, as is comparing all commercial rates from energy suppliers to those offered by local utility companies. However, this is almost always overlooked yet can deliver significant savings.
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