Optimizing Energy Procurement

An organization's sourcing and procurement solutions are fuelled by the experience and know-how of its personnel.

FREMONT, CA: Many organizations overlook energy portfolio management, despite its considerable cost-saving potential. This is likely because many organizations need more resources or expertise to properly manage their energy portfolio. Additionally, many organizations need to be aware of the potential benefits of energy portfolio management, so they do not prioritize it.

Regarding energy contracts, companies need to make informed decisions and spend cautiously to keep their bottom line in check while gaining a competitive edge. It is also crucial to sign long-term contracts as soon as possible and budget energy costs every year.

Market Research & Analysis: Markets are closely monitored and evaluated by experts in the energy category at industry players. From daily price trends to market regulations and rate case announcements, teams must monitor every move in the energy market that might affect procurement decisions across the country, regionally, and even globally. By using market reports, procurement leaders can formulate fact-based strategies that significantly impact their decision-making processes.

Planned Spending: Understanding the company's acceptable risk exposure and evaluating opportunities are based on a focused budgeting and planning process. Budgeting is considered an essential step toward risk mitigation since energy markets are highly volatile. With budgeting, businesses can identify potential risks associated with a given activity and potential loss mitigation costs. Budgets allow businesses to minimize their exposure to risks and better manage their resources to maximize profits.

Managing Portfolios and Risks: The price of commodities is highly volatile, especially the price of energy. Therefore, energy companies cannot predict costs accurately, so they need a risk management strategy to protect themselves from price volatility. In addition to diversifying their portfolios, they hedge against price fluctuations and incorporate different commodities. Procurement managers face difficult questions such as when to hedge, what percentage to hedge, and for how long to hedge.

Procurement Strategy Alignment: Companies leverages domain knowledge to ensure the procurement strategy aligns with the corporate strategy and is optimized to deliver maximum value to its clients. Based on factors such as time of entry, supplier product offerings, and contract terms, they develop the right approach for their clients based on their energy consumption profile. As a result, maximum savings are achieved while minimizing risk throughout the process.

Manage Contracts: There is a tendency for contract structures to be neglected during energy sourcing. The contract must contain the appropriate terms and conditions to protect a company's position under unforeseen circumstances. It may include liability and material change clauses that kick in when a company exceeds or underuses its committed volumes. If ignored, these penalties could result in significant increases in energy costs.