“He who lives by the crystal ball is destined to eat ground glass … Between 1979 and 1982, I had eaten enough glass to realize that what was most important wasn’t knowing the future, it was knowing how to react appropriately to the information available at each point in time.”– Ray Dalio, Principles
Procuring energy in an unpredictable market has become a challenge (and savings opportunity) for healthcare organizations that are under continuous pressure to reduce costs and risks while providing a safe and productive environment. Additionally, navigating changing legislation while accurately comparing apples-to-apples prices on risk-appropriate products can prove overbearing, time-consuming, and, if not done properly, costly.
A Few Things to Consider:
- Do you have in-house expertise to accurately compare and receive competitive pricing?
- For example, power prices can have 10-15 separate ancillary components that are all billed differently by different suppliers. Those components can drastically affect your overall spend.
- Can you get better terms and conditions? What is standard?
- When is the best time to go out for a new deal?
- Is the supplier/broker just wanting to collect revenue for as long as possible even though it may not be in your best interest?
- Does third-party supply make sense for your facility
- Occasionally, the utility is the cheapest option.
Ecom-Energy is the independent expert on energy procurement in the healthcare industry. We have assisted customers in the procurement of electricity and natural gas in every major region of the United States. We know the ins and outs of the deregulated markets and help our customers assess their internal risk to provide a product that best suits their needs and meets carbon reduction and sustainability goals. Suppliers like us because they know they will get a fair shot and customers love us because they know their energy portfolio is always proactively managed with savings in mind.
Ecom-Energy’s competitive procurement process provides:
- Budget Certainty – Energy procurement mitigates risk and allows facilities to create budget certainty.
- Savings Potential – With proper market timing, expertise, and strategy, customers can take advantage of savings opportunities in an energy landscape that is constantly changing, but also presenting opportunities.
- Cost Control – Take control of your own budget and spending to dictate when, how, and from whom you purchase your energy.
Ecom-Energy’s independent procurement solution includes but is not limited to:
- Assessment of Customer Needs & Market Conditions
- Risk Assessment Based on Customer Needs
- Carbon Reduction/Sustainability Goal Setting & Strategy
- Deal Structure Analysis
- Strategy Development & Implementation
- RFP Development & Bid Selection
- Bid Analysis & Price Negotiation
- Contract Review
- Market Monitoring to Assess Performance & Future Buying Opportunities
Before procuring energy, it’s essential to understand your organization’s risk tolerance.
Ecom-Energy works with you and your team to tailor an energy procurement product that reflects your organization’s corporate goals. Want to know what you will spend for the next three years? Choose 100% fixed pricing. Want to be open to changing weather, storage, and production factors in the chance there is savings? Choose 100% Index pricing. Fall somewhere in the middle? Choose 50% fixed, 50% Index pricing.
In all, instead of providing cookie-cutter contracts and product options, your organization will benefit from a term and hedging strategy that works to meet your energy goals.
Market Snapshot: Southern California
The graph below displays a snapshot of market conditions in Southern California via the Bidweek Indices for the region.
Bidweek Indices are set at the end of each month for gas to be delivered for the entire following month. They paint a picture of the market volatility that healthcare facilities are exposed to and which Ecom-Energy can help navigate.
Hover over each month on the graph to see historical pricing.
Energy Procurement Fact Sheet
All facilities need to purchase energy (natural gas and electricity). The question is never, “Should I buy?” It is, “From whom, at what price, and how?”
The process of purchasing a commodity in the futures market, similar to purchasing soybeans, coffee, oil, etc.
Prices constantly fluctuate in the open market based on internal (trading) and external (weather, supply/demand, etc.) factors.
There are two main contracts for energy procurement:
- Master Agreement: Lays out basic terms/conditions and allows the supplier and customer to do business together (enabling agreement).
- It is standard that a Master Agreement be signed before a deal is hedged as the Master Agreement carries no obligation to transact any business.
- Confirmation/Addendum: Details the particulars of a deal once hedged in the market (i.e. product, term, price, volumes, etc.).
Energy procurement confirmations or addendums are take or pay. This means that once a deal is locked/hedged, the supplier hedges it in the futures market.
You cannot cancel a deal before the term is set to expire without incurring liquidation costs.
As procurement is a hedge in the futures market, it is important to accurately hedge the proper volumes per month.
An improper, and substantial, deviation from hedged volumes versus actual volumes can create negative economic impacts.
What Is Energy Deregulation?
Energy deregulation gives you the power to switch your electricity or natural gas supplier and affects how much you will pay for the commodity.
Deregulation gives consumers a choice when it comes to their energy supplier. It also motivates suppliers to differentiate their products and offer competitive rates for your benefit.
Standard Utility Process
What Does Deregulation Mean for Me?
Having the power to choose your energy supplier allows you to compare natural gas and electricity rates, giving you more control over your energy costs. Deregulated energy also gives you the chance to choose from different products based on your organization’s budget and risk tolerance.
- You don’t have to worry about service interruptions when you switch energy suppliers because your local utility continues to deliver the physical commodity to your facility.
- The process is not a physical switching of service but a contractual switch from the utility to a third party supplier that is able to procure the energy commodity differently.
- Your utility is still responsible for distributing energy commodities to your facilities, regardless of the supplier that you choose.
- The only difference is that the supply price is not set by your utility.
- You will typically receive one monthly bill for the commodity from your supplier, and one monthly bill for the utility for the delivery of that supply.
Energy Deregulation in the United States
Energy Deregulation in the United States
|3||Arizona||No||N/A||No||N/A||In 2004 energy regulation was placed on hold due to various regulatory orders.|
|4||Arkansas||No||N/A||No||N/A||In 2003 Bill 1114 was signed to reverse energy deregulation laws.|
|5||California||Yes||1995||Yes||N/A||California’s electric choice works on a very limited lottery system called DirectAcccess.|
|6||Colorado||Yes||1999||No||N/A||Colorado is Natural Gas Deregulated, however no utilities currently offer choice programs.|
|7||Connecticut||Yes||1996||Yes||1998||Gas choice is partial and very limited.|
|8||Delaware||No||N/A||Yes||1999||Gas choice was trialed and discontinued.|
Since 2001, Ecom-Energy has partnered with Sharp HealthCare to provide energy procurement and energy budgeting services.
Through a detailed risk assessment and competitive procurement process, Ecom-Energy enabled Sharp HealthCare to realize millions of dollars in electricity savings against the utility in 2017.
Certified Energy Procurement Professionals
Ecom-Energy’s expert staff includes multiple Certified Energy Procurement Professionals (CEP™) as certified by the Association of Energy Engineers (AEE).
The Certified Energy Procurement Professional (CEP) program is designed to award special recognition to professionals who have demonstrated a high level of knowledge, experience, competence and ethical fitness covering the full spectrum of activities related to the purchase, sale and marketing of electricity and natural gas. By obtaining the CEP credential, you will be establishing your status as a qualified expert in this growing area of specialized expertise within the restructured energy marketplace.