Adding Energy to the Bottom Line
By now you have probably heard, read or been affected by plans to
restructure the electric utility industry. Lower energy prices
and value-added services were anticipated to encourage energy providers to
be more responsive to the needs of their customers.
Do you believe this? Well, it is true according to Dave Lambert, business
development manager in American Electric Power's metals sector. "Competition
in the electric utility industry is a complex issue, and as many
believe, the long-term benefits will provide potential savings, better
service and options for selecting suppliers and products not presently
enjoyed." Mr. Lambert said.
"While your present electric company will continue to deliver electricity
to your business, competition allows you to buy that electricity from
many suppliers. This choice gives you greater control over how much you pay
for the energy you use, as well as making available a variety of services
never offered before," he noted.
Exactly when the electric utility industry will be fully
deregulated is unknown, although some states are moving ahead faster than
others. Now is the time for metals managers to prepare for electricity
restructuring by evaluating their energy needs.
Getting the best value. Electricity pricing will depend on
a number of factors, such as the time of day and time of year when your
business uses the most energy, your ability to curtail use or provide an
alternate source, and the risks you are willing to take. Mr. Lambert
commented that the metals industry can prepare for competition by finding
out how its facilities use the electricity they are billed for each month.
"Some use, or loads, are constant and do not vary significantly from
month to month. Lighting and solution heating fall under this category and
are called base loads. These base loads along with your process loads will
be key to energy pricing. They will allow your energy supplier to accurately
estimate the monthly amount of energy its needs to deliver to your company.
Choosing an electric company. Restructuring will create the need for
metals industry managers to choose an energy supplier. Prior to making the
decision, consider what caused you to choose your present natural gas or
long-distance telephone carrier. Apply similar logic to choosing your
Decide in advance what criteria are important. Is price the only
consideration? How about the ability to speak with a knowledgeable customer
service representative when you need to? Maybe billing processes and
convenience are most important to you. Reliability and other value-added
services and products should also be considered.
Mr. Lambert suggests managers consider the following questions:
How familiar is the electric company's name?
How long has it been in the energy business?
Will you have an assigned account representative as your single point of
contact with the company?
Will you receive separate bills from your local provider and your new
How many customers does this new company presently serve?
Can it supply you with customer testimonials and telephone numbers so you
can verify the customers' satisfaction levels?
Basis for negotiation. Competition in the electric utility industry will be
an exciting time for utilities and their customers. However, you need to do
research before talking with suppliers. "In many ways, you will be
negotiating the price, service and contract length," noted Mr. Lambert.
"Since no one knows what the price of energy will be tomorrow, avoid
long-term contracts initially, unless you have the right to unilaterally
cancel your agreement without financial penalty."
If you do not have an energy strategy, establish one. This should
encompass a thorough knowledge of your energy consumption, the energy cost
of individual production lines and/or processes, your ability to withstand
interruptions and the associated impact on production issues, such as
just-in-time delivery, etc.
As far as staying current on changes within the electricity industry, a
utility representative should provide businesses with timely, pertinent
information on this topic. If your utility is not providing this
information, ask it to start. Being an informed consumer can translate into
significant savings for your business.