One question many decision makers encounter when dealing with overhead and costs is “When do I need to start looking at this?”

Every industry, service, and product is different but one thing is certain: You do not want to put your company in a costly and unfavorable position. Electricity and natural gas are involved in very volatile markets and prices can be guaranteed only as long as they hold, meaning price can change any minute. This is why it is integral that negotiating and market-watching start EARLY.

Often, it is possible to lock in rates as far as 18 months in advance. Is this always the best case? No. Is it smart to be aware of where the market stands so you can strike at the right time? Yes, but you probably do not have the time to worry about that (it’s only money, right?). That’s what a trusted Energy Consultant is for (learn more about those guys here).

Now we have the issue of timing. If your contract is up next week, you are obviously in a time crunch to get it done (and have not adequately planned for this). This situation makes you a hostage to whatever price is determined by the market at that time. People do not know that it can take almost a week to truly get a competitive price, especially if you use a larger amount of electricity (typically over 300 MWh annually). Throw in some unexpected weather or unforeseen spike in Natural Gas, and you are dealing with an unfavorable electric contract.

On the other hand, if you started looking ahead 5-6 months prior, you would have had the time to take advantage of dips in the market and can sometimes even set a realistic target price. $5-10/MWh can make a difference long term, and these simple savings can be reached if you value the importance of controlling your overhead costs.

 

Comments

comments