The 7 Biggest Mistakes Businesses Make When Purchasing Electricity

Purchasing energy use to be so simple. In a monopoly environment, you had no choices to make. You just took what they gave you. But now that energy has been deregulated, there are so many factors to consider that it’s easy to lose sight of key factors, fine print and hidden fees…and end up paying way more than you need to. Here are some of the most common mistakes business owners make in the new “Wild, Wild West” of deregulated energy…and how to avoid them.

Mistake #1. Focusing on the short term.

Your contract expiration date is looming, and you need make an a quick decision on your electricity contract. Sound familiar?

The problem is, if you want a fixed rate and your plan is about to expire, you have no choice but to accept the current market price.

Mistake #2. Misplaced loyalty.

Blind loyalty to a single provider at contract signing time is like the old “putting all your eggs in one basket.” Your company’s current supplier is in the energy business and understands that clients switch suppliers regularly. It’s a natural part of being in a deregulated environment.

Mistake #3. Assuming you can get the best price.

Obtaining best prices for energy is a combination of skill, determination and experience. Dealing with the commodity of energy requires a different skill set than overseeing how the company uses electricity.

Mistake #4. Failing to monitor the markets

The energy market shifts in line with supply and demand. To get the best prices you need to track the ups and downs of energy prices and make purchases accordingly. Tracking wholesale prices requires extensive experience, reliable sources of market data and plenty of time.

Mistake #5. Underestimating the complexity.

Are you developing an energy management strategy that takes into account a roller-coater energy market, the myriad rate plans and the right length of term for your unique business needs? Or could the time you spend trying to manage your energy purchasing be better spent on revenue-generating activities?

Mistake #6. Focusing on price, not savings.

The kWh unit price may be attractive, but what else is involved? You also need to consider other factors:

  • Are there ancillary fees hidden in your contracts?
  • Are you able to make apples-to-apples comparisons of the offers you do receive?
  • Are you considering where the market is going over the next 2-5 years and how that effects the deal you sign today?

Mistake #7. Going it Alone.

Trying to procure energy alone reduces the options (and savings) available to you. Online prices are seldom the best, but getting one-to-one attention from a range of suppliers to establish competition can be a real challenge for smaller users. Group buying schemes can offer savings but the “one-size-fits-all” pricing sometimes benefits only the largest members of the group.

How do you avoid these mistakes?

You can go it alone or choose to retain the services of an experienced independent energy broker.

  1. Brokers secure competitive bids from multiple providers and decipher confusing charges and hidden fees to find the true lowest electricity rates.
  2. Brokers leverage volume purchasing to negotiate on your behalf, causing a bidding war for your energy contract.
  3. Brokers capitalize on windows of opportunity that exist in the energy markets, helping you hedge your position to limit risk and save money.
  4. Brokers help you develop an energy management strategy, addressing both short and long term energy costs.
  5. Brokers provide market intelligence, making you aware of trends and opportunities in the energy markets, always looking for ways to save money and mitigate risk.

texzon-utilities-logo

Since 2002, as one of the industry’s most respected brokers, Texzon Utilities has helped companies of all sizes make well informed, strategic decisions regarding their energy purchases, producing savings that track to the bottom line.

Is an Energy Broker right for you? Start by allowing us to provide you with a True Apples-to-Apples rate quote, no hidden fees. We’ll give you a Starbucks Gift Card for your time.

Click here to learn more.

5 Truths About RFPs for Electricity Procurement

Conducting RFPs (Request for Proposal) for procuring commodities and services is an established practice, many times a mandate of the organization. But what many have found is RFPs are not the best tool for the procurement of electricity. Why? Electricity prices are like the stock market. There can be huge swings and short deadlines which presents a challenge for even the most savvy energy buyer. In many cases, energy prices are only good for a few hours. RFPs can be an inflexible tool when it comes to making decisions where precise timing is a key component.

The two most important questions in electricity procurement are:

1. “Is now the right time to buy?”
2. “Is this price the lowest price available?”

An RFP cannot effectively answer these questions. Here’s why:

1. RFPs focus on the process, not the final price
The focus of an RFP should be on picking the right supplier to partner with, and securing the best final pricing. It should not be a result of which supplier is willing to invest more in the RFP response. An RFP is extremely time intensive and produces reams of paperwork. This impacts both parties and we all know that these costs must be recouped somehow.

2. RFPs are not time sensitive.
Effective energy management more often hinges on when to buy not how to buy. If the RFP process places the buy window when prices are peaking, the lowest price at that time may be much higher than if you had written the contract a month earlier or later. Timing is everything in today’s energy markets. By nature, RFPs are not geared for quick, informed decisions.

3. RFPs force you to choose a supplier before knowing the final price.
Even though the process is designed to facilitate a competitive bid situation, RFPs can have the unintended result of driving buyers into a “single source” negotiation. Why? Because although a “preferred supplier” is identified through the process, the final energy contract still needs to be negotiated. Because of the variable nature of the market, a refreshed price would need to be obtained, which would not be subject to competitive bids.

4. RFPs don’t end up getting true apples-to-apples pricing.
As mentioned above, even though the RFP process results in competitive bids being generated, the unintended effect of the RFP is that the “winning bidder” will still need to get refreshed pricing based on daily fluctuations of the market, and when doing so would be removed from the scrutiny of an apples-to-apples comparison with other bidders. This result is the opposite of a competitive bid situation.

5. RFPs limit competition.
Even though the RFP has become a standard in many types of procurement, many vendors avoid it because of the reasons above and because the process is long and laborsome. Unless they are willing to invest a lot of time and money in the process with no guarantee of success, many may choose to pass on the invitation to submit. This may end up excluding suppliers that would have made the best partners, and limiting the number of competitive bids you receive.

In conclusion, when procuring electricity, it is debatable whether an RFP is the right tool for the job. Not only is the process outdated, but it puts more emphasis on the process than on the final results. The intended outcome is a competitive bid situation, yet the process in thwarted by a volatile energy marketplace. A more strategic and agile approach is to deal with an independent broker who will keep you abreast of the market and conduct an “internal RFP” on your behalf, bringing several competitive bids to the table at the exact time the market is right. The result is being able to definitively answer “Yes” to the two most important questions in electricity procurement:

Is now the right time to buy? Is this price the lowest price available?

There are over 300 electricity providers in the U.S., but only one Texzon. Since 2002, as one of the industry’s most respected independent brokers, Texzon Utilities has helped companies of all sizes make well informed, strategic decisions regarding their energy purchases, producing savings that track to the bottom line.

5 Things Your Electricity Provider Doesn’t Want You to Know

Now that energy markets have been deregulated and power suppliers have to compete with each other for your business, things have gotten…a little complicated to say the least. To make their prices look as attractive as possible, providers are playing some funny games with rates and fees and hidden “ancillary charges” Here are a few things they hope you don’t notice until it’s too late.

1. The quote you receive doesn’t always include hidden “ancillary charges.”

Let’s face it, if you have been in a deregulated market very long, you’ve probably found the price quoted doesn’t always match the bill.

Providers are competing on the base rate (kWh). The standard charges over and above the cost of energy are the delivery charges, PUC fees and taxes. These should all be known up-front and are supposed to be “pass-through” charges, in other words passed through with no mark-up. But what they don’t tell you can be huge. In some cases the provider may choose to inflate these charges to the customer, or add ancillary fees not included in the original quote. Buyer beware.

2. You can save money by signing a new contract up to 2 years before your contract expires.

If your contract expiration date is looming, this is not the best time to make a decision on your electricity. You might be forced to accept the current market price, which is higher than you like. Providers can play on customer’s fears of a power outage and pressure them to sign contract they regret. What they don’t tell you is that you can start the process long before the urgent takes precedent over the important. When market conditions are favorable, you can write a new contract for up to 2 years before your contract expires, thus locking in a lower rate.

3. Loyalty to the incumbent provider can cost you.

Your company’s current provider is in the energy business and knows that clients switch regularly. It’s a natural part of being in a deregulated environment. Don’t stick with your provider out of a sense of loyalty or misplaced idea that he’ll automatically work to get you the best price. Do your research and get several prices. If you want to be loyal, give your current provider a chance to beat the best price you find.

4. Talking to multiple providers makes good business sense.

Just like it is for most things, it pays to shop around for electricity. Most people don’t… because they think it’s too difficult and time consuming. That is a real concern, but if you place this in the hands of a reputable electricity broker, they can do all the legwork for you. Don’t put all your eggs in one basket.

5. Brokers bid out your usage to several providers, thus securing a very competitive rate.

A broker will do the heavy lifting for you. He’ll talk to his provider contacts, negotiate rates and get multiple bids based on your usage history. In effect, the broker causes a “bidding war” for your electricity contract. And when that happens you can rest assured you are getting the most competitive price available.

Conclusion: In a deregulated energy market like yours, it’s almost impossible to keep track of all the pricing games…and to know all things the providers would prefer you didn’t know. Fortunately, there’s a better way. A competent energy broker can insure that you have all the information you need to make the wisest choice. An energy broker is not loyal to any one provider. They work for you to develop an energy management strategy that’s best for you. And, best of all, it doesn’t cost you anything to work with a broker.

Since 2002, as one of the industry’s most respected brokers, Texzon Utilities has helped companies of all sizes make well informed, strategic decisions regarding their energy purchases, producing savings that track to the bottom line.

Aggregation Groups: One Size Does Not Fit All

The original purpose of aggregation groups was to get different energy suppliers to competitively bid against each other to provide the group with the lowest rate. However, in today’s energy climate, it doesn’t always work out the best for every participant in the pool. Here are some of the pros and cons of energy aggregation.

Pros:
  • Group administrators buy energy in bulk, so you could achieve savings you may not have been able to get on your own. There is a perception that all members benefit equally.
  • You are part of a large group so you feel comfortable, and it doesn’t require expertise in the energy markets. There is a perception of strength in numbers.
Cons:
  • Aggregation does not always yield a more favorable price: The final contracted rate may be higher because of the inherent constraints of working with so many different variables in a group buy.
  • Lack of Control: The group administrators choose the energy supplier, and make the final decision, not you.
  • Less Competition: Because of the complexity of the large deals, energy aggregation is limited to fewer providers. This decreases the amount of competition.
  • Less Flexibility: You are obligated to accept the group rate and term with no negotiation and few options, even when a lower rate or better term could be available to you outside the pool.
Beyond Aggregation? Texzon’s KiloSmart™ Program.

The game is changing. Today’s volatile energy markets are like the stock market, with prices changing hourly. In this climate it is challenging enough to manage energy procurement for one entity without leaving money on the table. Aggregation makes that job even more difficult, especially when the usage volume of each individual participant can vary greatly.

That’s why many of our customers who formerly participated in aggregation groups have found increased flexibility and bigger savings with Texzon. By implementing our strategic plan of staying ahead of the market, getting multiple competitive bids, and making informed, quick decisions when the market dips, Texzon customers are able to strengthen their position, limit risk and save money.

How Texzon’s KiloSmart™ Program works:
  1. Develop a procurement strategy. The unique size and shape of your load, current contract terms and future budgetary needs are all taken into account in developing a procurement strategy.
  2. Research the market. Texzon calls upon a multitude of sources to ascertain the state of the energy market, the latest pricing trends and important legislative or regulatory developments. These all help determine the best time to buy.
  3. Negotiate a Strike Price. Once a strategy is established, Texzon leverages its long-term relationships with multiple providers, conducting an internal RFP. With several suppliers competing for your usage, the result is a negotiated target price.
  4. Make informed quick decisions. When the agreed-upon and validated strike price is reached, a buy order can be initiated, assuring the customer that the timing of the buy, the per kWh rate and length of term all meet their exact criteria.
  5. Provide ongoing market intelligence. Texzon constantly monitors the energy markets, keeping the customer informed of trends or developments that could affect their energy program, and making recommendations on actions they should take.

There are over 300 electricity providers in the U.S., but only one Texzon Utilities. Since 2002, as one of the industry’s most respected brokers, Texzon Utilities has helped businesses of all sizes make well informed, strategic decisions regarding their energy purchases, producing savings that track to the bottom line.

5 Ways an Independent Energy Broker Can Benefit Your Business

With the current competitive environment in deregulated electricity, it’s no wonder most people who purchase commercial electricity are tired of pushy “energy sales guys” who come calling around renewal time. If you don’t need the hassle but also want to be assured you find the best deal for your business, there is an option you may not have considered. Your answer may be an Energy Broker: An independent and impartial third party who will do all the legwork for you and save you money.

These 4 questions may help you determine if you need a broker’s help:

  • Do I really have the time required to do a thorough job?
  • Is energy purchasing a top priority or an unwelcome distraction from my core business?
  • Do I have the in-depth knowledge to make a cost effective deal?
  • If the deal goes wrong, would I know how to get it back on track?

There are 5 major ways in which an independent energy broker can help your business:

1. Brokers provide in-depth market expertise.
Do you use outside sources for legal counsel, accounting, or IT? You do this because it’s either too difficult or because you found it saves money. Why would you treat energy procurement differently? Does your in-house person have the time or experience to make the best decisions?

2. Brokers provide strategic direction.
Energy brokers do more than just find the lowest rate. By taking the time to  understand the complexity of your operations and future business needs, they ensure that your energy contracts will deliver cost savings for the long-term, not just meet the needs of finding the ‘cheapest’ contract rates on the day your renewal is due.

3. Brokers can handle the complex task of buying power in deregulated markets.
There are over 100 Retail Electric Providers in Texas. Knowing which supplier has the right commercial requirements for your business is a complex task. Timing is critical, as wholesale energy prices constantly rise and fall. Monitoring the market for dips can make a difference of thousands of dollars.

4. Brokers force competition and use their leverage to get better pricing.
When energy suppliers are forced to compete for your business, you save money. Many suppliers will offer a different/lower price to brokers as compared to giving a customer a price directly, simply because they know they have to compete for the business. This drives the suppliers margin, as well as your final price, downward.

5. Brokers take a personal interest in your business.A broker is your friend in the energy business. As your agent in the market, they keep your business in mind 12 months out of the year, not just renewal time. They look over your contract and first electric bill to ensure you are being charged the right amount for the energy you use. If a dispute arises, your broker can help resolve the matter on your behalf.

Why call an Independent Energy Broker?

It’s cheaper. It’s easier. It’s less time consuming.

Since 2002, as one of the industry’s most respected independent brokers, Texzon Utilities has helped companies of all sizes make well informed, strategic decisions regarding their energy purchases, producing savings that track to the bottom line.
Go to texzon.com to learn more.