What Is Your Rate?

What is your rate?

This is the one question on every business owner's mind, especially because renewal prices are generally trending upward. They ask the question as if they are buying gasoline, or an oil change for a car. If the gas station a few blocks down the street has a better price per gallon, then we go there. Every penny counts! This is the working mindset for commodity product shopping, toothpaste, shampoo, cotton swabs … whatever. We purchase it, use it up, throw away the empty package and go buy more. No brainer, easy!

Procuring energy for your business in today's market is not that simple. Unlike comparing gasoline prices at two different stations blocks apart on the same day, business owners do not typically have a way to compare multiple offers simultaneously. There are a lot more factors that go into the price / rate of energy procurement. Whomever you ask "What's your Rate?" needs some information from you in order to render a credible answer. They need to know usage, seasonal fluctuations, changes in use pattern, when your current contract ends, green energy requirements, bandwidth requirements, and so much more.

A much better question to ask your energy supplier rep would be: What is covered by your quoted rate? There are 7 factors that every energy supplier is legally obligated to pay. Your rate can cover all of them. However, not all rates cover all 7 factors. When all 7 factors are covered by the quoted rate, the rate is a fixed rate. When some factors are not included in your rate, your rate is variable. Those factors that are not covered by your rate will have to be paid somewhere. So you will either have monthly rate fluctuations or monthly line items added to your invoice. Both the fixed rate and variable rate products have their appropriate uses. The energy consumer must be advised on the different outcomes to be expected in total out-of-pocket expenses for their energy.

Then there are contract language considerations. Some contracts are very tight; others have a tremendous amount of wiggle room from the supplier. Some have stricter payment history requirements; I can not know what any company qualifies for without a fair amount of information from you, the business owner. I want to help you save time and money over time.

I recently had a meeting with a large independent grocery store owner. He just completed a renovation complete with lighting upgrades. He went from fluorescent tubes to LED lighting. His usage reduced enough to generate an addition bandwidth fee. The fee made his lighting upgrade not profitable in the short run. A thorough review of contract language could have saved this owner quite a bit of money.

Procuring energy for your business is more complex than rate shopping. Rate shopping wastes your time and your money.

You can start the process by having a utility bill audit. There is no up-front cost to you, and we may find that your company is eligible to receive hundreds of dollars each year in discounts and credits because your utility had been charging you incorrectly. You do not even need to change suppliers. You have nothing to lose and everything to gain.

Marco E. Dimbo – Procurement Expert Advisor at Ohio Energy Guide.