Energy Procurement – Avoid common mistakes
Consultants can help companies anticipate and sidestep common mistakes when it comes to annual energy procurement, explains Joe Anderson, chief executive of Black Sheep Utilities
For all but the largest businesses, energy procurement is at best an annual inconvenience and at worst an annual opportunity to make a costly mistake. Every business uses energy: it’s not particularly exciting, but it is essential. You may as well follow some simple guidelines to get the most value from your energy procurement.
Black Sheep Utilities is one of the fastest-growing and successful business energy consultancies. As founder and CEO, I saw an opportunity to stand out from the 1000’s energy brokers and do something different. I wanted to change the way companies look at energy brokers, to make it simple and easy to understand. We only exist because the energy companies do not look after their customers properly and make things far too complicated. Our team enjoys helping people save the most time and money possible. We come across companies all the time who have made terrible procurement decisions in the past and it can cost vast sums of money if you get it wrong.
Here are a few of the most common mistakes companies make with their energy procurement.
“Basket deals” or “group buying deals”
These are marketed as opportunities for many businesses to get together and buy energy on mass. The benefits should be greater buying power and better prices. Sounds logical, right? Wrong! These basket deals are almost always more expensive, and it means you lose any control over which supplier you choose, or which contract you agree to. The suppliers charge admin fees and brokering fees and the organisers have complete control over your energy procurement and often earn large margins. Everyone gets a good deal except the end user.
Going direct to a supplier
Sometimes businesses get lucky and buy at the right time and call the right supplier and arrange the right contract. However, 80 per cent of businesses with an energy expenditure of more than £20,000 per annum use a broker or consultant. 80 per cent of businesses can’t be wrong. They get better service, better value and better advice. So we would advise the use of the services of a broker or consultant when organising your energy procurement.
Buying short-term, or at the last moment, in the hope energy prices will go down
In the past, many companies have left securing their energy contracts until they received their renewal letter and then, at the last minute, negotiated better rates. Unfortunately, this is not the case. In a rising market, prices are 20-30 per cent higher now than they were 12 months ago. If you start the procurement process early you have the option to wait, but if you leave it too late you have fewer options which will be more expensive.
Getting many brokers to supply quotes
Suppliers must price larger energy quotes manually and on a bespoke basis. All brokers and consultants get very similar prices from suppliers. Getting 20 different quotes will just get you the same prices in different formats. It will make it harder to make the right decisions.
Find one or two consultants you trust and ask them to give you a full analysis of the market. Energy procurement shouldn’t be complicated; it should be simple and easy to understand. That’s what we do. We are ranked in the top one per cent of all the UK business brokers and it’s down to the simple way we look at your energy.
Black Sheep Utilities can be contacted on 01273 914000 or you can book a callback appointment with one of the team.
