Best Practice - Teaming for Energy Procurement

In the beginning, (energy deregulation-wise) the responsibility for energy procurement devolved upon those primarily involved with its use - facilities, real estate, construction, maintenance, manufacturing, etc. In fact, most companies considered energy costs an uncontrollable operational issue, rather than a financial or strategic one. As time wore on, energy costs continued to rise (as they have tended to do for the last decade or more), and eventually procurement people began to ask questions like, "How much do we spend on energy, anyway?" When the answer came back anywhere between several million dollars to over a billion dollars, depending on the company, the scramble was on to bring energy sourcing into the procurement fold. There needed to be transparency and auditability, a strategy, a plan, and a process.

Some procurement people, armed with righteous indignation, set out to grab energy procurement from the operations people, who often responded by tightening their grip, resulting in a see-saw process that eventually saw one or another group prevail. The problem was, operations people did not appreciate or understand the need for rigor in purchasing, and the procurement people weren't exactly sure what energy even was or how to deal with the myriad complexities surrounding it.

Today some companies continue to have energy procurement responsibility firmly ensconced in one group or another. However, firms that have sought to bring the best experience and traits of both functions together for the purpose of executing an effective procurement strategy are the ones that are getting the most out of their efforts. Often a team is formed with a small core group of people devoted to facilities management - or engineering or demand-side initiatives - and procurement, with the input, understanding, and awareness of other stakeholders and contributors from, for example, operations, legal, accounting, real estate, finance, and risk management. Small meetings between the core group responsible for the day-to-day tactical issues may be held as often as once a week to track progress and update each other on initiatives. The larger group (often including senior management) is brought together initially and annually to outline the overall strategy and then, quarterly or semi-annually to review progress and adjust the strategy, based on results and changes in the business environment. In some cases, outside experts are brought in to facilitate the process or augment internal staff, especially regarding issues such as regulatory framework, wholesale market trends, e-procurement and budgeting.

For more insights into this structured, strategic team approach to energy procurement and supply management, read our white paper on strategic energy sourcing at www.energywindow.com.

Quick Buyer's Tip

Buy now - save later! Many energy buyers wait until the end of their current contract to shop for subsequent periods, but this practice often leads to disappointing results. Not only does the narrowing timeframe force a faster decision than may be desirable, but waiting until the last minute frequently means watching the wholesale market run up further than it would had you decided to act early. Some end users are finding it wise to shop a year or more prior to the end of their contract - but not blindly. They are also watching the trends to assess when conditions appear favorable, relative to historical price behavior, and acting on opportunities when they are.

New White Paper - A Must Read for CEOs, CFOs, and CPOs

The new EnergyWindow white paper, Energy Rises to C-Level, offers strategic insights useful for senior executives of companies with significant energy spend. Too often, executives overlook energy supply management as a powerful tool for controlling a seemingly uncontrollable, top operational expense - energy. This paper shares practical, actionable information and illustrates how application of familiar financial risk management principles to a disciplined strategy for energy management puts executives accountable for energy costs within their organizations back in the driver's seat when it comes to containing energy supply costs. To download this timely paper written from the perspective of senior management, visit http://www.energywindow.com/pdfs/EnergyRisesToC-Level.pdf

Our Web Site Has a New Look, New Features

Have you visited our site lately? If not, take a few minutes to visit www.energywindow.com. Along with our fresh, new look and brand new content, you'll find an easier to use navigation bar that allows you to preview and locate information more quickly, more intuitively. As always, you'll find a wealth of valuable information and decision support tools, all free of charge.

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We'd Like to Help

If you want know more about how EnergyWindow can provide you with the tools, processes and information you need to navigate and prevail in the complex waters of energy procurement and supply management, call Doug Zinno at 877-444-0497.

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EnergyWindow offers a deep repository of energy data, tools and information to MarketElert readers - all at no charge. Simply visit http://www.energywindow.com/researchandinsight.shtml, register if you haven't done so already, and you'll get instant access to wholesale and spot market energy prices, a searchable database of energy-related articles, links to energy career sites, supply reserves, weather, securities information, the MarketElert archives and much more. It's all there, available 24 hours a day, 7 days a week - and best of all, it's free!