Adding Energy to the Bottom Line

There has been no shortage of news reporting on a state-by-state basis of the restructuring and deregulating taking place within the electric utility industry.

In the best case scenario, deregulation is expected to bring lower energy prices and value-added services while encouraging energy providers to become more responsive to the needs of their customers.

Don’t believe the hype? Well, it’s true, says David Lang, manager, national accounts with the metals sector of American Electric Power, Columbus, Ohio.

“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,” says Lang.

“While your present electric company will continue to deliver electricity to your business, competition will allow you to buy that electricity from many suppliers,” Lang continues. “This choice will give 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.”

Exactly when the electric utility industry will be fully deregulated is anyone’s guess, although some states are moving ahead faster than others are. And, says Lang, now is the time for scrap facility managers to prepare for electricity restructuring by evaluating their energy needs.

GETTING THE BEST VALUE

Electricity pricing in the future will be dependent upon a number of factors, such as the time of day and time of year a business uses the most energy; a company’s ability to curtail usage or to provide an alternative source of power; and the risks a company is willing to take regarding price fluctuations or service interruptions.

Lang says the metals industry and scrap recyclers in particular can prepare for competition by finding out how their facilities use the electricity they are being billed for each month.

“Some usage, or loads, are constant and do not vary significantly from month to month. Lighting and water heating fall under this category and are called base loads. Determining these base loads—along with process loads—will be key in future energy pricing as they will allow an energy supplier to accurately estimate the monthly amount of energy they will need to deliver,” Lang remarks.

“Accurate energy estimates will remove a degree of risk for your energy supplier and may entitle you to reduced energy prices,” says Lang.

Many utility companies will analyze a company’s or facility’s energy consumption patterns and, in the process, offer energy efficiency suggestions. By understanding the energy consumption of a business and staying abreast of the changes occurring in the electric utility industry, Lang says a business owner should be able to take full advantage of the newly-created competition.

HOW TO CHOOSE AN ELECTRIC COMPANY

Restructuring will create the option for recycling managers to choose an energy supplier. With the potential for a number of choices available, making a selection could prove challenging.

Think about what made you decide on your present long-distance telephone carrier, says Lang. Businesses will need to use similar logic when selecting an electricity provider.

“Decide in advance what the important criteria will be in selecting a future supplier,” notes Lang. “Is price the only consideration? How about the ability to speak with a knowledgeable customer service representative when you need to? Or maybe billing processes and convenience are most important to you. Reliability and other value-added services and products should also be considered,” he adds.

“Knowing what’s available and matching these products and services to your business will help you take full advantage of competition,” says Lang. He suggests recyclers and scrap processors  also consider the following questions:

•How familiar is the 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 supplier?

•How many customers does this new company presently serve?

•Can the company supply you with customer testimonials and phone numbers so you can verify the satisfaction level of current customers?

A SOUND BASE FOR NEGOTIATION

Competition in the electric utility industry will be an exciting time for utilities and their customers. Lang advises managers to do some research before talking with suppliers.

“Go slow and do your homework up front,” he says. “Remember, in many ways, you will be negotiating the price, services and contract length with this company. Knowing your own energy consumption patterns and the potential suppliers is an advantage that should effectively help you get the best deal available,” Lang adds.

“Since no one knows what the price of energy will be tomorrow, let alone the next year, avoid long-term contracts initially unless you have the right to unilaterally cancel your agreement without financial penalty. Read the small print,” Lang cautions.

A business owner lacking an energy strategy should establish one, Lang says. The strategy should encompass a thorough knowledge of the company’s energy consumption; the energy cost of individual processes and major pieces of equipment; the ability of the company or facility to withstand interruptions and the associated effects on production of interruptions; and a look at the potential benefits of value-added services and other business needs, such as accounts payable efficiencies.

As far as staying current on changes within the electric utility industry, a utility representative should be providing their business clients with timely, pertinent information on this topic, Lang believes.

In the future electricity marketplace, being an informed purchaser can translate into significant savings for a recycling facility.

This article was supplied by American Electric Power, an electric power supplier to three million customers in seven states.