Energetics Leads the Way in Energy Savings

01 Oct 2004Archived News Energetics in the News

PUBLISHED: Facilities Management Association Magazine.

Best Practice energy management is the aim of all facility managers - but what about the procurement of energy? FM magazine asked Karen Brock, Practice Area Leader of Strategic Energy Procurement, from Energetics for some advice.

FM: What are the current trends and challenges in the market place that businesses purchasing energy need to be aware of?

KB: Conventionally, prices have been lowest in March or April, but this is no longer always the case. As more businesses increasingly negotiate their energy contracts around this time, the wholesale market has responded with increased prices during this period. This is making it more difficult for businesses to pick the best time to negotiate their energy contracts.

Environmental charges are also due to ramp up significantly to meet scheme targets and as new schemes come online. Energy users should therefore structure their contracts to ensure that retailers have an incentive to minimise environmental scheme costs.

FM: What are some of the challenges that your customers face when choosing their energy supplier?

KB: Electricity charges have become more complicated and customers need to look at more than energy rates, as what they cover differs between suppliers. Customers need to ask questions as to whether costs associated with compliance of Renewable Energy Certificates (RECs) or other state-based environmental charges are included? Is third party Force Majeure (FM) insurance included? What services are provided and what risks are associated with the Terms and Conditions?

State-based environmental charges such as the NSW Greenhouse Gas Abatement Scheme (NGAS) and the Gas Electricity Certificates (GECs) scheme (soon to be implemented in Queensland) are also becoming more prevalent and form an increasing component of the overall cost. We expect these schemes to account for up to 10% of negotiable energy costs in the next few years. These schemes can also create revenue opportunities for energy users, e.g. in NSW some end-users are creating NGACs (NSW Greenhouse Abatement Certificates) which they can then sell to retailers to help cover costs of energy projects.

Other negotiable costs, such as metering, can vary considerably and some retailers apply charges such as fixed monthly fees or Responsible Person charges. Quotes from the top 2 or 3 retailers will often be very close and the difference between metering costs or their approach to environmental obligations can make a big difference in the selection process.

Contract duration is also important for minimising long-term costs and customers should consider prices for all contract years as well as market expectations for the life of the contract and beyond.

FM: What advice would you give to your customers to help them minimise costs through effective procurement of energy?

KB: There are a few simple steps that end users can take to maximise savings through effective electricity procurement:

  • Be aware of all current contracts and their end dates;
  • Don't leave negotiation of your new contract until the last moment;
  • Include all retailers in the tender;
  • Avoid retailer call centres - track down contacts for account managers;
  • Provide detailed and accurate data, including information about possible future changes where known;
  • Don't include unreasonable requests, such as free energy audits;
  • Prepare for internal sign-off;
  • Make a quick decision, since electricity offers are typically valid for 14 days at the most;
  • Move as many sites as possible onto one contract to maximise negotiating power and minimise procurement costs;
  • Get help from an independent expert if your energy budget justifies it. We typically advise that if your contract is worth more than $500K per annum it is worthwhile engaging a consultant to assist with your negotiations.

Also, don't forget about small sites that use less than 100 MWh p.a. - if you have a large number of them (typically 50 or more) you can use Type 5 or Type 6 metering to achieve savings. Small sites should be included on a separate contract to your large sites. Regularly review your network charges, as there is more than one network tariff option available to most customers. Selecting the optimum tariff can have a big impact on regulated costs.

FM: In what other areas can you advise your clients to minimise costs?

KB: The process for purchasing your energy is just one way to ensure the most efficient supply and usage. You could also gain advantages from having a specific usage profile across a day, month or year and achieve savings by undertaking basic modifications to your work practices or your equipment. Energetics is well placed to provide advice on increasing energy efficiency and maximising cost savings through demand side management, greenhouse reporting and bill checking.

Energetics is Australia's leading energy and greenhouse solutions provider. Energy is our business and we work with our clients to minimise the total cost of their energy through both procurement and energy saving projects in a way that makes a real contribution to their bottom line.

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