Summit Energy: Tips for Negotiating the Energy Buy

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Know Your Exposure. There are many costs associated with delivering natural gas. Some scenarios will permit the use of multiple supply sources delivering to the same end-user. This strategy can allow you to take advantage of each supplier’s strengths and help to negotiate a lower overall supply cost. In addition, you will limit your exposure to one supplier which provides a level of protection to you, especially given the current economic and credit environment. - Patrick W.

Know When to Buy. One of the keys to the energy buy is that it cannot be done on a fixed schedule. Watch the markets, model their patterns and strike when the iron is hot. If you are waiting for “90 days from contract expiration” to run energy RFPs, you are likely leaving significant dollars on the table. Not only is your fiscal opportunity heightened when you buy strategically as opposed to mechanically; but, if market prices drop and the supplier’s phone rings with your call, he knows that you are paying attention. In that light, you send a signal that you won’t be fooled through the process. - Vance W.

Know Your Options. When negotiating a natural gas deal, pay attention to all the costs that are involved. If the pricing simply will not move, consider other beneficial negotiation moves such as minimizing expensive cash out adders (incurred from using more or less gas than you contracted) or credit requirements. Reducing your required deposit amount by $10,000 could free up $0.50 a unit that could go toward other projects. - David T.

Know Their Position. The key to any negotiation is knowing the counter party as well as knowing your limitations. If the counter party needs you to move their product and you are the only one that can, then it needs to be priced accordingly. On the other hand, if this is reversed and you can't sell your own product or make product unless this counter party is there, then you also have to know your limitations and can expect to pay slightly over market because of it. Meeting the middle of the road – offering respect as well as getting respect – makes for a long term relationship. - Mike S.

Know the Details. Compare and Contrast: Energy pricing structures are not created equal. Choosing the option that offers the lowest price does not always mean you have selected the best deal. When requesting price proposals from suppliers or reviewing alternative utility rate options, read the fine print to ensure you know exactly what you get for your money. The devil has been known to hide in the details. - Dominic B.