Any highly effective electricity or natural gas procurement strategy includes a well planned Request For Proposal so that the execution of the overall strategy doesn’t fall apart when it comes time to pull the trigger. This guide will attempt to assist energy professionals and consultants in making well informed procurement decisions.

Most companies can’t afford to hire an energy manager and those large organizations that can often still need to rely on energy professionals that know the specifics of a given commodity (electricity, natural gas, heating oil, etc.) in a given market (e.g. Texas: ERCOT California: California ISO, New Jersey: PJM). That need often leads facility purchasing managers to companies like ours that specialize in developing electricity procurement strategies experienced energy consultants trained in the intricacies of each deregulated market in the US. Still, some organizations need to conduct an energy RFP.

First, let’s make sure your organization should be considering conducting an RFP. Questions to ask about your own organization prior to beginning the Request For Proposal process.

1. Does your energy spend in the commodity (electricity, natural gas, heating oil) exceed $30,000 annually?

If not, you should consider requesting commercial electricity rates from a company that can provide you with pricing that is standardized for organizations that fall within a small to medium bucket. This pricing is usually equally or more competitive than customized “RFP” pricing for companies with a spend under $30,000/year.

2. Do you have the time to do all the due-diligence?

If your answer is “well, that depends on what due-diligence is necessary” then my recommendation is:  get help with procurement!  So many factors and moving parts exist in the energy industry. Enron isn’t around any more, but that doesn’t mean the same people aren’t floating around out there, even at some of the old, big-name energy companies your great-grandmother .

You need to be very careful to make sure your energy agreement explicitly includes all costs that are customary in the market and for the commodity your buying.

You need to know the timeliness of your energy purchase as related to the market.

You need to know what energy products are available and beneficial to your organization.

You need to know how much exposure (risk) your company can withstand so that you can select the offer with the maximum risk/reward ratio.

You need to familiarize yourself with the going-on in legislation. It can often affect your costs in a big way See ERCOT: Nodal)

3. Do you know what energy companies to contact?

There are a growing number of energy companies available to commercial and industrial customer and that number is constantly growing as more states deregulate and energy prices favor switching. You can often find a list of registered companies available on the Public Utility Commission web site in your state, but that’s only part of the work. You will want to weed out those companies that do not serve your customer segment (some only serve residential, large industrial, etc). You will also want to refine your search to include companies that are established with good reputations. Use your local BBB and review PUC complaint statistics for the energy companies you are comparing.

Electricity and Natural Gas Procurement Process – The RFP:

If you are still reading, we have established that you are qualified to conduct your own RFP, or stubborn enough to try anyway. Optimal results are the goal, and it’s difficult to write something that applies to all, but here are some tips that should prove valuable to you;

1. Explicitly define what energy product and term you are seeking offers for.

You want to avoid “salesmanship” being a factor in your company’s decision making. By knowing exactly what energy product (Heat Rate, Index based, Fixed term fixed rate 100% tolerance, etc) you are looking for, you avoid being like the car buyer who went looking for affordable transportation that would accommodate his small family and drove away in a H2 with the salesman laughing all the way to the bank.

2. Get input from your colleagues toward the RFP.

“There is wisdom in many counselors.” If it’s good enough for the Bible, I have to think it’s good enough for an RFP. You and your team will be glad when the positive results of the RFP reflect a team effort.

3. When writing the RFP, ask easily answered, but open-ended questions (‘how’ and ‘what’) instead of (‘will you’ or ‘do you’).

Energy companies will shy away from even responding to very time consuming RFP questions. That may be ok with some, but you do not want to miss out on the offers from the busiest (and that often means best) energy suppliers.

4. Set reasonable expectations.

An electricity or natural gas procurement  RFP typically takes two to four weeks for a company that does not have pre-existing history with all the participants.  Do not expect to get complete proposals in days if this is your first contact with the energy companies.

5. Be up front in your negotiations.

The energy suppliers you submit your RFP to must earn your trust, but if you want to earn the best price from the best company, you should be firm but honest and transparent in your negotiations. Let them know that they are up against other companies and what criteria you will be basing your ultimate decision on.

6. Eliminate wasted time (yours and the energy suppliers) by filtering the crowd.

Only those electricity or natural gas companies that you would strongly consider doing business with should be contacted. Check their complaint history out with the Public Utility Commission in their state. Review their complaint history with their local BBB.

7. Thorough, timely and accurate responses are just as important as price.

If the proposal you receive contains errors, why should you expect your first bill to be any different. It is important that the company sending you a proposal shows they value their customer’s time by providing their response on time and error-free.

8. Feedback, Feedback, Feedback!

Not only will feedback to providers on their price, product, contract and any other factors help you ultimately receive the most optimal result, it will help the supplier in their efforts to improve. Good feedback will improve your chances of getting a response from that energy supplier again in the future.

Speaking of feedback, if you have any good ideas or tips to share about this article, please comment below.

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