Strategic Energy Procurement: 5 Tips for CFOs

For most CFOs, energy procurement is simply not their radar. But energy prices can be extremely volatile. Energy markets and regulations are complex and ever-changing. If you’re a CFO or facilities executive in manufacturing, health, education, property management, or the like, it is a good practice to have energy on your risk management map and cost efficiencies radar. Even better; know that strategic energy procurement and energy management can help lower costs.

Here are 5 tips to help you more effectively manage your energy costs:

  1. Know how your energy is being procured
    Energy procurement is one of those responsibilities that can be anywhere in your organization – it may be in Procurement, Facilities, EH&S, Operations, or Finance. In working with several hundred companies and competing against hundreds of brokers, one thing is very clear:  the quality of your energy procurement is highly dependent on who’s doing the procuring.
  2. Demand analytical, fact-based recommendations
    Making decisions about procuring your energy involves the known and the unknown. A great deal of data exists about energy markets and facility usage. Informed analysis of how you are using energy and how it is impacting your costs should be done. Knowing your budget and risk objectives helps you effectively deal with the unknowns like future energy prices. This type of analysis will inform the appropriate strategy, product, and duration for your energy buys.
  3. Understand energy contracts
    Your energy supply price is made up of many components. It’s important for you to understand all the components going into your price and whether your contract assigns the risk of changes to you or your supplier. Your contract should take into account building expansions, moves, closures, onsite/offsite generation, and other initiatives that could affect your rates or cause penalties.
  4. Identify opportunities to reduce costs
    You can lower the energy costs of your organization with the right energy supply product and a competitive bidding process involving multiple suppliers. In addition, there are services that can reduce your energy demand, such as demand response, energy efficiency measures, and on-site generation like solar. Whether these additional services are right for your organization depends on what markets you are in and your specific usage circumstances.
  5. Measure results and learn
    Once you do your due diligence to identify who’s managing your energy procurement and who is on your procurement team, and you’ve have gained the level of understanding required to be confident in the company’s energy contract choices, you should establish benchmarks and monitor results. When you can gain insight through the analysis and tracking of your energy plan, you and your team can make improvements to energy and cost efficiency so you can achieve business and sustainability goals.

Cost-effective energy management is increasingly complex in today’s energy markets and business climate. Usouce’s expert team of energy analysts and advisors can work with you to proactively manage your risks and identify savings opportunities. Contact a Usource energy advisor today.


energy managementenergy procurementenergy strategy

About the author

Scott MacDonald

As Usource's Managing Director, Scott brings 25+ years of experience in the energy industry to the Usource Team. He is a recognized expert in energy economics and consulting. He holds an MS from MIT and a BA in economics from the University of New Hampshire.

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