Energy Procurement – How to Reduce Your Energy Costs

great way for businesses and consumers to decrease their monthly energy bill

Energy procurement gives companies the chance to proactive buy energy to create more efficient, flexible and cost effective strategies, in an effort to reduce energy prices. A thorough knowledge of the underlying economics, energy generation, transmission factors, political and environmental influences and their combined impact on energy prices are vital. Energy procurement solutions are a great way for businesses and consumers to decrease their monthly energy bill while at the same time improving the company’s bottom line.

The best way to start a procurement program is to understand your current energy consumption trends. For instance, are you consuming more electricity when you use your laptop, computer or television? Are you using natural gas to heat your home? What factors are influencing your increasing energy costs? These are the questions that you need to ask yourself in order to develop an energy procurement strategy that takes into consideration all the variables affecting our daily energy use. Then, with this information in hand, you can begin working towards creating new buying opportunities that will help you reduce your energy costs even further.

fuel utilized for energy cost reduction

There are currently two major sources of energy consumed by organizations and households; namely, petroleum and coal. Coal is by far the most popular form of energy consumed today and is used for heating, cooling and lighting. Petroleum has become an increasingly important fuel source for the transportation industry as well as for electricity generation. Natural gas and cCF are another form of fuel utilized for energy cost reduction. Natural gas and cCF are both delivered through pipelines and are both relatively inexpensive.

Natural gas and cCF are traded in standardized formats, so the pricing of these commodities will generally be uniform across energy suppliers. Although it can take a bit of a learning curve for some customers when it comes to negotiating energy supplier rates, it can also save you a great deal of money if you happen to know any good price killers. In energy cost reduction, having an understanding of which companies are consistently low and which are consistently high is the first step in securing discounted prices. One of these companies is the American Petroleum Institute (API), which publishes its own quarterly reports that break down the price differences between various suppliers of natural gas and coal.

using less energy than you are consuming

When you are negotiating energy procurement, you must take into account several other factors such as the level of your dependency on the energy supplier, the level of energy consumption in your locality, the volume of energy supplied by the supplier, and the price levels that your prospective suppliers have in common with one another. As part of its research, API has developed a numerical calculation called a KWhA that relates the price of energy provided by the suppliers to the amount of energy required to provide the service. To simplify matters, if you buy enough energy from a supplier at a certain price per KWhA, then you are considered a “net energy consumer”. Basically, this means that you are using less energy than you are consuming. If, however, you buy less energy than you need, then you are a “net energy producer” and are considered an energy importer.

In order for energy companies to offer you competitive rates when they issue your invoice, it is important that you understand the relationship between the amount of energy produced and the amount of energy required to deliver it. The more efficient your supplier is at delivering the service, the less you will have to pay for gas or coal. In the end, it is all about how much you are willing to pay for gas and electricity. To find a reliable energy supplier that can best serve your needs, Energy Cost Analytics can help.

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