Energy & Utilities Services
Think You Can’t Reduce Energy Spend in a Regulated Energy Market? Think Again
If you manage energy spend in a regulated market, there are still actionable steps you can take to capitalize on savings.
If your company operates in one of the 35 U.S. states with a closed energy market, then you probably think you’re locked into standard rate structures. We often hear procurement professionals and energy buyers lament, “It’s not possible to reduce indirect spend in this category because we’re in a regulated market!”
Most teams buy into the myth that uniform pricing is a given in a regulated market: What you spend is what you spend. But that statement is fundamentally false. There are actions you can take as a category manager to reduce energy costs. You just have to know where to look.
If you manage energy spend in a regulated market, here’s what you can do to take advantage of savings opportunities.
1. Ask Your Energy Supplier About Rate Plan Options
It’s not unusual for some companies to be placed on a default pricing plan based on the amount of energy they’re likely to require. Once that rate is set, it’s rarely revisited.
But it’s important to note: From large investor-owned utilities to state-run entities, municipal utilities, and cooperatives, many energy providers do offer pricing structures that can be tailored to different consumer groups and how they use energy. For example, some plans may reduce rates for industrial manufacturers that consume power during off-peak hours.
Sometimes these alternate-tariff options are advertised; sometimes they aren’t. It pays to find out for sure—you may discover that an unpublicized plan yields substantial savings.
Before you have the conversation with your supplier, evaluate your spend with them so you understand your expenses and for what you’re being charged. Then you can quickly compare those expenses to possible savings opportunities.
2. Explore the Possibility of Incentive Packages
Many category managers don’t realize that regulated markets offer incentives just like deregulated markets. There may be business tax incentives that you aren’t taking advantage of.
In Tennessee, tax exemptions are available for electricity and natural gas used in qualifying industrial activities, particularly manufacturing. To initiate the exemption process, businesses must inform their energy supplier of their manufacturing operations. This triggers a formal assessment involving the completion of exemption certificates and engineering studies to evaluate the percentage of energy consumption attributable to direct manufacturing use. The qualifying portion is then exempted from state sales tax in accordance with applicable regulations.
3. Opt Out of Energy-Efficiency Riders (or Lead a Self-Directed Program)
Typically funded by charges added to your utility bill, a utilities energy-efficiency program supports rebates and incentives associated with equipment upgrades. In other words, through energy-efficiency riders, they help companies recover the costs associated with facility improvements that reduce energy consumption and demand.
The riders could provide rebates for things like:
- Lighting retrofits
- HVAC upgrades
- Industrial process improvements
- Building insulation
In many states, however, opt-out provisions are available to certain customers. For example, if your company is a certain size, you may be able to un-enroll from the program or lead a self-directed program instead. This allows you to redirect those funds toward your own energy-efficiency projects—and not to the utility’s energy-efficiency program.
Fine Tune Ensures Effective Energy Sourcing
Navigating the energy and utilities spend category is not an easy task. That’s why Fine Tune is here: to simplify complexity, strengthen supplier relationships, and optimize energy costs.
Whether you manage energy spend in a regulated or unregulated environment, our experts know how to ensure effective sourcing and category management to reduce your utility expenses.
