USIndoor's Official Magazine is a quarterly publication, dedicated to owners, managers, program administrators and other professionals, startups and providers involved with indoor recreational sports facilities.
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Best Practices: Energy Procureme I n April, the Energy Research Council (ERC) conducted a survey of 1,254 middle-market companies in states that have deregulated energy procurement to assess how they procure electricity. Today, approximately one quarter of the U.S. energy marketplace has actively deregulated electricity procurement. In deregulated states, businesses can enter into contracts with competitive retail electricity suppliers. These suppliers can sell directly to customers or market electricity through third-party sales channels like energy aggregators, brokers, and consultants. "Middle market" refers to the size of a company, usually in terms of its revenue or asset base. There is no universally accepted revenue range that defines middle-market companies. Conceptually, middle market companies fall between main street companies (below $5 million in revenue) and large multinational corporations (over $1 billion in revenue). Although this survey focussed on middlemarket companies, its findings apply to main street companies as well. Best Practices: Electricity costs have a major impact on facility operating budgets. In deregulated states, facilities should compare competitive electricity supply prices to the local electric utility's rate, and review expenditures on a frequent basis. How difficult is it to compare competitive electricity suppliers? Perhaps the most complex issue in selecting the right electricity supplier is comparing "apples-to-apples" regarding pricing and contract terms & conditions. While most price quotes are based on a fixed price per kilowatt hour (kWh), many variables and pass-through items in electricity supply contracts can impact the final bill. For example, two fixed-price contracts could produce different electricity charges, based on bandwidth restrictions, capacity charges, line loss provisions, change-inlaw clauses, and other contractual items that create pass-through fees. In addition, many electricity supply contracts differ in early termination penalties, auto-renewal provisions, term flexibility, and other standard contract features. Comparing prices is also challenging because different electricity suppliers provide indexed quotations based on different contract terms and rate components. "Middle-market decision makers must clearly understand the terms and 14 conditions in each competitive supplier's contract," said Michael Payne, JD, LLM, Executive Vice President & Corporate Counsel for consulting firm APPI Energy. "Before signing a contract, conduct due diligence to determine what will happen if your business uses drastically more or less energy than in the past, and what happens when the contract expires." Because electricity market prices change on a daily basis, most companies review multiple price quotes. ERC research shows that only 21% of middlemarket companies sign an electricity supply contract based on a single price quote. Most (62%) require at least two to three price quotes before selecting a supplier. Best Practices: Utilities' rates change regularly because of tariff structures and market fluctuations. Forecasts of electricity market trends, and information about proposed future rate increases or decreases, are helpful, but complex for most companies to track.