In this challenging economic environment, all businesses are seeking ways to conserve their financial assets. However, it is difficult when costs to run a business do not remain stable.
For laundries, electricity and natural gas are ongoing expenses necessary to do business. Fortunately, one nontraditional avenue has come available in the past few years to help curb those expenses - the deregulated energy marketplace.
Similar to the deregulation of the telephone industry, many markets now have the option of deciding on their own energy suppliers. The deregulated energy marketplace has dramatically improved the landscape for commercial users to purchase electricity and natural gas in a competitive and transparent environment. Today, there are hundreds of companies in the deregulated energy marketplace across North America.
The markets deregulated for electricity purchases are: New York, New Jersey, Connecticut, Illinois, Michigan*, Maryland, Maine, Ohio, Massachusetts, California, Texas, Delaware, Oregon, Rhode Island, Pennsylvania and Washington DC. In Canada the markets deregulated for electricity are Alberta and Ontario Canada. Most markets in the United States are deregulated for natural gas.
So if you make the switch – how much can you save? Savings may vary from 5-30% based upon several factors. Those factors include credit worthiness, market liquidity and the amount of energy you will be purchasing. If a client is bad credit risk, vendors will charge a premium due to risk. Market liquidity comes into play since some markets are more liquid than others and there is a variable on the amount of energy that is being offered to purchase. Finally, the larger your demand for energy, the more aggressive suppliers will be on their pricing.
WHAT TO KNOW BEFORE SHOPPING FOR A SUPPLIER
You can shop for a new energy supplier on your own – or you can have a company help you with the nuances. If you choose to do it alone there are several things you need to be aware of.
Know your marketplace and learn who the competitors are. Ask the energy supplier for references of companies that have been using their services. Follow up by calling the references for an independent, third party insight.
If you decide to use a suppliers services, make sure you understand your contract. It is very important that you take the time to review the contract to confirm that there are no hidden agendas. Some suppliers may levy a fine and penalties if you chose to stop using their services. Other companies may place an auto renewal privilege in the contract. You should beware of inclusions since you, the client, are allowed the opportunity to check the marketplace for competitive pricing when the existing contract is due for renewal.
The buyer of electricity or natural gas needs to be aware of other pricing issues. Sometimes pricing for services may not address all of the details for the cost of energy. It is prudent to ask any supplier when quoting a price what does the price include? Does it include taxes or other fees/levies? Make sure you know all the costs before you sign on the dotted line.
It is also important for you to understand the nuances of your contractual agreement. Will you be able to purchase some energy from renewal energy sources without paying a premium to do so? Are there opportunities to include minority suppliers, consider green credits and carbon credits? Especially in today’s day and age, many companies are looking to help the environment while boosting their brand image. Make sure you know where your energy supplier stands on that issue.
YOU DON’T HAVE TO GO IT ALONE
If you’re looking to lower your costs but you just don’t have the time or expertise to seek out the best supplier for your situation – there are companies that will help you navigate
the unregulated waters. However, here too, you must be knowledgeable about the process.
First and foremost, know the company you are working with. Do your research on the company and learn if they are an independent company or if they are a division of an energy supplier.
Be careful, some companies are divisions of a supplier and they will steer your business towards their parent company when in fact, it may not be the best terms or pricing
for your energy requirements
Beware of companies that ask for a retainer with fees up front. You should not have to pay fees for their services. Seek out a company that will not charge fees to help you
understand your energy options with regard to the deregulated energy marketplace. The company you turn to for help navigating the deregulated landscape should do so
on a neutral basis/performance basis. Why pay fees before you know if there is a savings? The company should shop around for competitive prices and be supplier neutral. They should match you up
with the best supplier for your needs and guide you to clealry understand contractual nuances.
THE AUCTION PROCESS
Some companies will offer an auction process for prospective suppliers to bid for your business. Usually, the live auctions have bidders that are prequalified to bid for your business.
Keep in mind that there are different types of auctions. Some companies will offer a reverse auction or a post and respond auction. What makes the reverse auction or post
and respond energy procurement process different?
The reverse auctions take place on a specific date and time where as the post and respond events allow a client to track the marketplace for pricing spanning time frames to run
events for 30, 60 or 90 days. In either scenario the energy procurement process provides a transparent process by inviting the supplier marketplace to compete for a client’s energy requirements in a live web based environment. This type of auction usually drives down the cost of energy compared to a paper based RRP that may leave money on the table when working with only a few
vendors. This process is a performance based approach without risk, obligation or cost to you.
You are still not going it alone. Recommendations are provided for each event; however in the end it is you, the client that confirms the desired vendor and duration of the agreement. All suppliers along with their perspective agreements are presented for internal review with the client before the events unfold so that there is buy in from legal, finance and procurement; this step
insures that there are not any distractions during the events.
Clients will have the opportunities to run events in the deregulated markets for electricity or natural gas spanning various time frames for
reverse auctions or post and respond opportunities.
WHO MANAGES THE AUCTION PROCESS AND ONGOING POST EVENT SUPPORT?
When you are dealing with an auction company, a turnkey process is provided to manage the entire process. There are not any long term
commitments or requirements to change process or dedicate additional resources. All information from the administration of the process to the gathering of data, the building of the RFP’s, running the
events and thereafter providing post auction/event marketing intelligence is overseen by the energy team without additional cost.
WILL THE INCUMBENT WIN?
In most cases the incumbent does not win; however at times it is possible. When clients see the result of the event and confirm that the incumbent did not win because the
lowest bid was provided by a new vendor, you, the client now have a clear picture about how much money could have been left on the table if you accepted the price offered by the incumbent without inviting competitors.
Quick Rinse - News From Around The World
Employee Crushes Hand on Ironer
SOMMERVILLE, Mass. — A commercial laundry has been fined by OSHA after an employee’s had was crushed while lubricating the chain of an ironer that was running. The OSHA inspection found that the machine was not de-energized prior to the maintenance that was attempted. Royal Institutional Services Inc., has been cited by OSHA for four alleged violations of workplace safety standards. The laundry, owned by Angelica Corp., faces a total of $49,935 in proposed fines.