Posted by: Paul Foster
Most people know that more competition lowers prices, and energy buying is no different.
However, buying energy is unique in that rapid changes are affected by so many other factors such as geography, time of day and that buying in bulk doesn’t necessarily give you more buying power.
No other area of significant expenditure has such buying complexity.
Energy prices resemble the stock market
Focus on the job in hand otherwise you miss the opportunity to buy well.
Energy market prices change a lot more rapidly than any other overhead cost said Paul Foster, Business Cost and Energy Management specialist for Auditel. For example telecoms pricing changes, but suppliers don’t give you a price and say ‘We can’t guarantee this price and you will need to order this today or the price changes’
With energy markets, the price is changing hourly.
Volatility is what makes energy buying uniquely complicated. “It’s in the top 10% of the most complex cost categories along with telecoms and information technology. The longer into the future you buy, the greater the risk the higher the prices, sometimes, but other times prices could go down.
Energy prices change dramatically in any direction, often for reasons outside of anyone’s control.
Buying energy is unique
Energy buying requires specialist market knowledge, buying power and constant monitoring.
Auditel aims to be every energy supplier’s best customer, and when an opportunity comes up, we want them to think of us first. Testimonials from the UK’s leading energy supplier British Gas and many others confirm our position as the UK’s leading Energy Cost Manager.
Auditel uses market information and their more than 200 specialists to monitor the market and share this information for the benefit of our more than 3,700 clients.
So what’s the answer?
The more you buy, the more leverage you have, but that’s often not the case with energy.
Energy costs can vary for reasons outside of anyone’s control, unit or total cost reductions cannot be the only measure of success. Paul Foster said he can often point to money saved but success often comes from staying ahead of the market and taking action to avoid or mitigate rapidly rising costs.
It’s hard to pin down cost savings, with energy you should look at what you would have paid if you hadn’t acted versus what you did pay. With many public company budgets certainty is more important than locking into a better rate, even if prices drop as it enables them to meet financial market expectations. Privately owned companies may prefer a more risky approach and hope to benefit when energy market prices go down.
It’s almost impossible for many companies to employ energy buying experts, so they use independent energy brokers who are driven by commissions and energy supplier targets.
Who are they working for you? Or themselves?
Energy is a full-time job: Ours!
All purchasing professionals recognise how energy procurement differs from other overhead costs. It’s important to accept that there can be a steep very expensive learning curve, but also staying abreast of energy costs and concerns requires constant oversight.
Complex areas such as energy procurement and management should be outsourced to specialists.
Managing energy costs need concerted effort; you have to treat it as a full time job to do the best you can. If you make it a part time job, you won’t do it as well. Can you really afford to take a part time approach to such a significant overhead cost?
Outsourcing to a specialist who can keep your costs and energy use under control over a long period of time makes complete business and financial sense, particularly when our service pays for itself!
How much money are you wasting on energy?
Book a meeting with Paul Foster today to find out how much money you’re wasting on energy and review your energy buying strategy.