A few extracts from and a link to a good article that fits well with our Making Our Own Markets theme. 

Profit Building Strategies for Competitive Energy Markets

As the electric and gas industries continue to undergo a de/re-regulatory transformation aimed at producing more competitive markets for the supply of power commodities and utility services, the big question is whether companies are prepared to reap the benefits. The vast majority are not.

[an error occurred while processing this directive]Commercial and industrial customers, especially those large energy users with many facilities, could enjoy significant financial gain in a restructured marketplace. The businesses with the most to gain from competitive power markets are those with multiple locations around the country. Such companies spend millions of dollars each year on electricity, yet most lack what they need to take full advantage of market-based pricing:

•   A strategic centralized focus on energy management.

•   The information needed to manage energy-related costs on an ongoing basis.

The restructuring that is currently under way directly impacts the supply (utility) side of the equation.  The coast to coast, interconnected network of monopoly suppliers is being broken into separate entities for the generation, transmission and distribution of power commodities and utility services.

These changes on the supply side will create a need for a different approach on the behalf of buyers.  Previously there were very few decisions to be made. Now, the simple purchase transaction is being transformed into a series of complex new decisions, none of which the average buyer is prepared to make at the local level. While there will certainly be advantages to the restructured electric power market, they will be virtually unattainable without a centralized management focus on energy.

The case for management

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The basic goal of energy management is simple: Improve business performance and competitive standing by getting more value from energy. That includes substantially reducing costs while maintaining or improving the reliability and quality of supplies.

The current electric power industry structure —utilities as regulated monopolies — limits companies’ ability to influence prices and terms of service. Most can do little except buy from local suppliers at rates fixed by state regulation. In time, however, utility territories will disappear, and supply-and-demand pricing will take hold.  

Experience with the natural gas industry shows that deregulation can lead to substantial savings. Competitive markets create a pricing structure where volume, time of day, and point of delivery will more dramatically impact the cost of that energy than ever before.  

Already, most utility tariffs discount energy used outside hours of peak demand, which generally coincide with the business day. Companies that learn to monitor and control consumption can use those discounts to their advantage today. In a fully competitive world, those companies will be positioned to negotiate highly favorable supply and service contracts and save even more.  

At the same time, few companies have the in-house resources to manage energy for greatest advantage. The biggest winners in competitive markets will be companies that develop:

• A thorough understanding of utility industry structures.

• Comprehensive knowledge of commodity markets.

• A centralized infrastructure for collecting and analyzing data on energy usage.

• The ability to act on energy data in ways that support key business objectives.

To read the complete article click on the link below.

http://www.jci.com/metasys/articles/ProfitBuildingStrategies.PDF.

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