Inprova Energy

How to think strategically about your next energy contract

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How did you approach your current energy contract? Was it a positive experience? Are you sure you’re getting the best value from your supplier and your energy procurement strategy?

If your energy contract is due for renewal, it’s time to think about how to replace it. This job may have landed at the bottom of your to-do list but it’s important to get right. A poorly-sourced energy contract can have a serious effect on a business’s profitability.

It is always good practice to revisit the key considerations in advance of your company’s contract renewal. With that in mind, here’s how to think strategically and pick the best energy contract for your business.

Know your current position

Before diving into the search, it is important you thoroughly understand your current contract. Pay particular attention to the following:

  • What is the renewal date?
  • Are there any penalties for failing to renew by a certain date?
  • Are there cashflow considerations for overlapping contracts?
  • What is the forecast for annual energy usage?

Map out your future energy use

The energy strategy for your business will inform your choice of contract. Revisit the goals and milestones set for the business and consider their potential impact on future energy usage.

If changes to product lines, service levels or the staff base are certain, how will the business’s energy usage alter? Will it increase, decrease or become less predictable?

These potential changes in the business’s future energy use should be a key consideration when choosing a new contract.

Define your energy strategy

Energy managers will be all too familiar with the need for an energy strategy, but if this is the first time you’ve heard such a phrase, it is vital you develop one. You can do so by defining the following:

  • How your business currently uses energy
  • How your business intends to use energy in the future
  • The energy-saving attitude and measures adopted by employees
  • Transparent goals that your energy procurement is aiming to achieve
  • Having a clear idea of how the energy strategy supports the overall business plan

Keep an eye on the market

You may already keep tabs on the wholesale energy market, but come renewal time, market knowledge becomes more important than ever. 

How are energy prices performing in the market? What is predicted to change over the next one to two years? Are there any new forms of renewable energy on the horizon that could benefit your energy strategy and annual bill?

Keep a close eye on the energy sector - it will provide useful insight when considering your next contract.

Monitor legislation changes

Energy prices change, but so does legislation. Avoid a common pitfall of energy procurement by closely monitoring legislation changes. The best source for such information can be found on the Department of Energy & Climate Change website.

Your carefully defined strategy could be all for nothing if you miss a crucial new ruling or piece of legislation that undermines it.

What to do next

Speak to your current supplier and inform them of your intention to review your contract. Some may issue a penalty if you fail to renegotiate by a particular date, so be sure to ask if such a rule exists.

Your current supplier should also be the starting point for the search. What type of contract renewal can they offer you? They’ll want to retain your business, so you should be able to drive a decent deal.

The above tips will force you to think strategically about your next energy contract, but with so many elements to keep on top of, it pays to lean on the services of an energy advisor during the procurement process.

Download our FREE e-guide on 5 Questions to Ask When Looking for an Energy Advisor

 

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