Lowering Energy Costs

Here are some tips and tricks on how to gain savings on your energy contract.

By WILL MCGINNIS, CAS, Infinity Power Partners

Looking at so many pertinent and important aspects of apartment communities during and after the COVID-19 pandemic, one item that can often be overlooked or seem hopeless is your electricity and natural gas accounts.

Looking at so many pertinent and important aspects of apartment communities during and after the COVID-19 pandemic, one item that can often be overlooked or seem hopeless is your electricity and natural gas accounts.

Transparency is key in the world of commodities. Trusting in your supplier or consultant can be the difference between massive savings or lost savings.

Energy Costs

Energy costs are a calculation of a multitude of items but mainly the following: time of year (the contract’s start date), usage or load and weather. It is important to note, your electricity rates are not correlated to oil and gasoline prices at the pump. Instead, it is natural gas prices that correlate with your electricity rates. I say this because it is a myth we hear far too often. Right now, the heat rate portion of the calculation is driving energy costs. Heat rates are basically a calculation of how efficiently a power plant is converting its fuel source to electricity, i.e. coal-fired, natural gas, wind/solar.

Start Date

Your start date is more meaningful than most people realize. The start date is the date that your contract begins. Most clients believe they cannot setup a renewal or plan until their current agreement expires. This is not true. The ideal structure is to get a term that lands you in the spring or fall months for the best pricing. Including more summer or winter months in a term can create added premium due to expected spikes in usage.

So, the start date has a lot to do with your pricing and the models structured by the supplier. Finding a sweet spot term that can put your start date at a more advantageous date is ideal for pricing and future renewals. One aspect that we see, espe

What could a review of my electricity or natural gas account accomplish? Why is now an opportune time to review my energy accounts? If oil and gas prices have dropped, will electricity be cheaper too? Now may be as good of a time as any to take advantage of a light summer. If you know you are up in 2021, future pricing will continue to become less favorable as you approach expiration.

cially in the multifamily sector, is the proactive approach to renewals. You can lock-in pricing for electricity or natural gas contracts at any time. You simply set the start date to your current expiration date. You aren’t breaking a current contract, but instead you are guaranteeing savings and ensuring that you beat the market moving forward.

Usage

Usage or load is an obvious factor. Like anything, the more you use, the cheaper the cost. The unknown is your demand factors. Think of your energy use as a car. Your speedometer meters the exact level of usage at that moment, or kilowatts (kW). Your odometer also measures the overall usage through the entire service period or month, or kilowatt hours (kWh), what most people are familiar with on their invoices. If you have severe spikes or increased usage (speedometer), the utility has to account for supplying that power at any given time. This can increase premiums for future renewals in following years, however, the demand totals each year are reset on a rolling 12-month strip, so not all is lost if you have a bad month.

Weather

Lastly, the weather is a key factor. If it is summer and very hot, it is likely that costs will be higher as usage and demand across the grid will increase. Recently, with the COVID-19 epidemic, Texas only saw a drop of approximately 2% in total demand through the month of June. The type of usage shifted in two forms, by the time of day and residential increases exceeding commercial usage. But as summer months hit (or the inverse, winter), you will notice that usage will continue to remain constant no matter if COVID-19 impacts are still being felt by businesses.

This goes back to timing. If you must look at renewing an electricity or natural gas contract in the winter or summer, try to wait for a mild (weather) time or week that can alleviate some of the premiums. Reviewing or pricing ahead of time will also help in this situation, as the premiums become more aggressive the closer to the start date. Consultants that focus on the market can be a great partner for items like this, as they can advise the absolute best time(s) to go to suppliers for pricing.

What could a review of my electricity or natural gas account accomplish? Why is now an opportune time to review my energy accounts? If oil and gas prices have dropped, will electricity be cheaper too? Now may be as good of a time as any to take advantage of a light summer. If you know you are up in 2021, future pricing will continue to become less favorable as you approach expiration.

The most ideal situation is if your contracts expire in 2021 through 2022. As such, begin your review(s) now. We are seeing major suppliers work to accommodate any green initiatives to win renewal opportunities, which means that you can negotiate great rates that include marketing green efforts (as well as the impact on the environment) for your communities. It is always a great time to ensure your utility accounts are in-line and that nothing is being billed incorrectly.

Think of ways to take advantage of $1.50/gallon at the pump before it goes to $2.25 next year.

With everything going on this year thus far, we are recognizing and realizing the changes that can often be overlooked are sometimes the most meaningful. Energy and electricity pricing can seem like a secondary item in the grand scheme of things. But as you review, reset and restart it may turn out to be a worthwhile effort to give to your utility accounts.

Will McGinnis, CAS, is the vice president of business development for Infinity Power Partners, an energy management and consulting firm based in Houston. Infinity Power Partners work with electricity and natural gas customers nationally. They also provide procurement management solutions, risk management services and market insight throughout the development of client-specific strategies. McGinnis can be reached at 713-559-0559 or via will@infinitypowerpartners.com.

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