Tips for evaluating and ranking energy supply prices and suppliers

December 7, 2015

You can gain more control over your energy budget and avoid the risk of potential price spikes this winter. Commercial and industrial energy consumers are advised to closely examine supply prices now because prices are at historical lows and are at levels not seen since 2002.

How many electricity suppliers do you evaluate when considering supply prices and supply contracts? More than 80% of middle-market electricity customers evaluate only two or three electricity suppliers before making a selection, according to an Energy Research Council (ERC) survey.

If you evaluate only a few suppliers, how do you know if the prices the suppliers provide are low, high, or average? What if you leave money on the bargaining table? Would you know? Evaluating only two or three suppliers is likely an inadequate approach. It does not yield enough actual price intelligence on which to base a long-term business decision and commitment. For a customer with annual usage of one million kilowatt hours, the cost difference between the lowest and highest supplier prices could be $50,000+ per year.

Electricity consumers appear to be seeking expert advice regarding procurement. The majority (56%) of ERC survey participants responded that they want help evaluating, ranking, and selecting energy suppliers. ERC surveys indicate that less than half of respondents renewed with their incumbent supplier the last time they purchased electricity. Why is that? Eighty-eight percent of survey participants that selected a new supplier said “price” was their primary reason for switching suppliers. Given that reality, why would any buyer base a decision on a limited number of prices from just a few suppliers, particularly when abundant price discovery from many suppliers can be obtained?

APPI Energy provides data-driven procurement and consulting solutions that reduce and manage energy costs on an ongoing basis. The firm’s energy supply procurement platform accesses thousands of prices daily. A staff of experts evaluates suppliers and prices on behalf of 2,300 clients. If you want to learn more, contact APPI Energy at 800-520-6685.