Purchasing Energy in a Dynamic Market
Reliable and reasonably priced energy is a critical need for any business enterprise. The larger a venture, the higher the sensitivity of energy cost for its financial health. Energy costs have risen steadily for last dozen years, according to the U.S. Department of Labor (DOL) actual data, and will continue so for next 20-25 years, forecast by the U.S. DOE. Energy cost has been a factor in siting decisions for energy-intensive production or process facilities, as seen in migrations from the industrial belts in north to the southern states where energy was cheaper. To their credit, the utility companies and local government authorities formed economic development councils to attract local business growth, and they showed positive results. That is the supply side of the market: energy providers and promoters. On the demand side, end-users should also hone their skills to get the best out of the market. The good old days of state-regulated price stability have been replaced by a high degree of price volatility. Buyers look at the energy market for the best rates to keep their energy costs down, as do utilities; both compete in the same market. Understanding trends and projecting the future is essential for the energy managers and buyers today. When states set the cost rates, they were stable, so it was easy to fit the cost into business models. In today’s market, the endusers have to compete more effectively in their product market.
Some details will be different for large users than for those with small or medium demand, but all can benefit from the broader choices today, including those opened by deregulation. It has been tested in various mixes in most states and the results have been different on users, large and small. Many states refined their open choice rules after trial phases, now concluded. Only one element in the equation is not fully stabilized at this writing—the true market demand, as businesses scaled back below normal capacity since the 2008 economic downturn. The market has partially recovered from the depths of 3-4 years ago, but the demand is still skewed from the true market potential. This will change, we all hope, and the prices will move upward to their true position. This is time to know the market and be ready to seek the best possible costs for next purchase.