Energy Sherpa
Your Guide to Energy Savings

Energy Bites

Knock Out Utility Expenses through Energy Procurement


One of many ways to save money and improve a hotel or commercial property through energy management is to consider options in energy procurement and find a new energy supplier. While an understanding of energy procurement processes may not be common knowledge, becoming informed on the subject in order to consider it can make it a viable option in addition to energy use reduction and energy efficiency in order to save on energy.

What is energy procurement?

Energy procurement is the process of obtaining energy through a supplier other than the utility. In the United States, about half of the states have deregulated energy markets, most for both gas and electricity but some just one or the other. Regulated energy markets have one utility generating, supplying and distributing all energy at a set price, that utility has power over the entire energy process but in deregulated markets wholesale electricity is sold to suppliers who then have power over rates and various services offered, the utility still has a role in these markets however they do not have power over the transmission and generation of energy.

What is the process behind procuring energy?

The process of energy procurement involves a market of bidding and reverse auctioning. Suppliers bid for customer accounts first then the customer participates in a reverse auction in order to find a supplier that best fits their needs in rates and service.

Why should hotels consider energy procurement?

While deregulated utilities lack the certainty that regulated markets provide they can allow for significantly lower rates and contracts tailored to the customer that cannot be offered by a regulated utility. For hotels, energy is the second highest operating expense, following payroll. Therefore in order to minimize costs and improve their bottom line taking advantage of low cost energy options is of primary importance. Energy procurement can allow for your hotel to consistently get the best rate available by having the markets constantly tracked in order to monitor rates and purchase energy at the right time. There are also green power options available through energy procurement which increases sustainability and in turn public opinion and guest approval.

Various aspects of a company go into the process of energy procurement in order to determine what supplier is the best option for a buyer. Everything from budget to legislation to company needs are important to a company’s individual procurement needs. Simply going with the lowest rate available is not always the best option. While finding the lowest rate is ideal, it is more important to find suppliers that are good, creditworthy, long term options and choose one with a low rate out of those. A major benefit of deregulated energy is the ability to have energy contracts tailored to individual company needs therefore, negotiation is a vital part of energy procurement in order to achieve a tailored, low rate energy supply.

The low rates and the green, renewable options offered by energy procurement make it a beneficial option for hotels and other commercial properties in states with deregulated energy markets. Considering energy procurement and other energy management options could allow for increased sustainability as well as decreased utility bills.