Product category:
Energy management; Boiler control
News Release from: McKinnon and Clarke | Subject: Energy budgets
Edited by the Processingtalk Editorial
Team on 03 October 2005
How to get the most from our energy
budgets
With vastly rising utility costs year on year companies should be looking at maximising energy usage - the potential to reduce utilities expenditure in business should not be underestimated
With vastly rising utility costs year on year companies should be looking at maximising energy usage - the potential to reduce utilities expenditure in business should not be underestimated If left unmonitored, energy users can expect to face escalating utilities prices and inefficient usage issues
This article was originally published on Processingtalk on 27 Sep 2004 at 8.00am (UK)
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De-regulation of the energy markets has led to a vastly more complex purchasing and decision-making process for businesses if they are to optimise price, choice of supplier and negotiate better terms.
Price volatility in utilities has also contributed to the complexity of the market as the move to a commodity market impacts on electricity, gas and telecoms.
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Water price rises can be offset say analysts
Water price rises averaging 9.6% (excluding inflation) were introduced on 1 April 2005 as a result of the regulator, OFWAT, price determinations for the period to 2010
A further consideration has been the build-up of environmental legislation and taxation policies that have led to additional cost burdens on utility pricing.
This in turn has focused users on controlling their costs and consumption.
Saving energy is core to energy management just as much as price optimisation.
For FDs to be in control of utilities they must employ a two-pronged approach, focussing on effective energy management, to control usage as well as price.
Energy Purchasing Costs.
One of the main concerns for FDs is the volatility of energy pricing and how to manage this effectively to minimise the risks involved.
In recent months escalating prices have been hitting the headlines, but what options are there for FDs in dealing with negotiating better rates that are sustainable? Those in the know are making substantial savings by employing the expertise of organisations that have the experience and time to obtain these results.
There are five utilities that need to be considered: electricity, gas, water/wastewater, fuel and telecoms.
Each one is as important as the next in devising an energy management strategy.
Bill Analysis.
Overcharging occurs in all of these utilities.
Bills have become more complex and, as a result, it is more difficult for consumers to detect anomalies or areas of overcharging.
The elements of charges that make up bills, and the rationale behind these elements, are often at fault.
Detailed knowledge is essential in identifying many discrepancies; often, albeit understandably, this is not typical within an average accounts department, whose main focus is bill payment.
* Gas/Electricity.
The Gas market is extremely volatile, with different drivers affecting commodity prices to varying degrees: McKinnon and Clarke monitors all known variables on a daily basis - from up-stream outages to changes in the weather, to the price of oil and perceived future demands of industry and generators.
* Water.
Water prices rose on 1 April 2005, and look set to continue rising over the next five years.
Businesses and water-intensive industries can no longer ignore the fact that this utility should be recognised as an area in which costs can be reduced.
Traditionally, a lack of knowledge at how to offset the price rises has led to many FDs overlooking water as part of their energy management strategy.
Through analysis of client bills and processes, McKinnon and Clarke's Water Division has saved thousands of pounds on water for clients.
While the savings differ for each customer, smaller organisations are as susceptible to overpaying as larger companies.
* Fuel.
To optimise efficiencies of price and usage negotiation, expert industry knowledge and monitoring of the markets, and the factors driving fuel prices, is essential.
To achieve the best prices available in the fuel market, FDs would need to monitor the markets and any developments in them.
Additionally, they would need enough market knowledge and experience to allow them to interpret of any trends or changes to the markets, and to recognise how these will affect their business.
McKinnon and Clarke monitors the markets through systems such as Bloomberg and Platts Oilgram, allowing it to react to geopolitical events in real time.
* Telecoms.
In monetary terms, the greatest risk concerning telecommunications costs is fraud.
A number of "unauthorised usage" issues need to be addressed.
Records show that some employees in the UK may be making as many as 15 premium rate calls during the working day.
It is possible to minimise the level of risk your company is exposed to through system abuse by setting thresholds and alert triggers - where employee indiscretions can be identified very quickly, and action can be taken.
There is also a very real danger of financial risk that accompanies non-analysed bills.
Industry reports show that 80% of telecoms bills are incorrect, with anomalies ranging from incorrect address details to poorly applied tariff structures and incorrect charges.
Millions of pounds each year are lost through inaccurate billing and human errors.
Although businesses are bombarded with offers of cheap call rates and seemingly unbeatable packages, and whilst these may seem an attractive option, the market is a minefield and there are various pitfalls that FDs should make themselves aware of.
* Legislation.
There are three main areas of legislation that businesses should make themselves aware of, as these will also impact on their costs, and could result in even more being cut from their revenue if not managed correctly.
These are the Cllimate Change Levy (CCL), European Union Emissions Trading Scheme (EU ETS) and the British Electricity Trading and Transmission Arrangements (BETTA).
McKinnon and Clarke has an in-house team of legislation experts who actively develops plans for clients to deal with the impact of such legislation, ensuring the costs and effect on the business are minimal.
Top Tips for Reducing Energy Costs and Consumption.
So how do the energy experts do it? David gives us his top tips to get us started.
Costs.
* Don't assume your supplier is giving you the best deal available.
* If you are receiving advice from a supplier, bear in mind that this is not impartial.
* Costs for energy are dependant on where your energy comes from, when you use it, where you use it and how much you use.
* Prices should be reviewed at times other than when contract renewal is imminent in order to optimise your energy resources.
* Continuous market monitoring is essential to identifying and acting on key buying times.
* Your exposure to risk increases when assessment of energy charges is a one-off solution, this should be a continuous process.
* In terms of both providers and charging structures, one size does not fit all - this is dependant on your requirement as a company.
* Don't assume that water charging structures are simple just because they are non-negotiable - there are savings to be made.
* Buying fuel is a more complex business than ringing round the main suppliers when you need to refuel, the market fluctuates and should be monitored to identify the most effective buying times.
Consumption.
* Free energy audits may be tempting but remember that an audit in itself does not secure any areas of saving.
* Implementation of cost effective measures are only beneficial if they are continually managed.
* 30% of water produced in the UK is lost before it reaches the customer, it follows that a percentage of the water received will be lost by the user themselves.
* It is commercially attractive for businesses to tackle environmental issues, there are penalties for those companies who do not address this matter and this affects the bottom line.
* Energy efficiency is a large area of expertise with many solutions available - it is unlikely that your site manager or engineer will be aware of all of innovative efficiency measures which could be implemented.
McKinnon and Clarke has over 29 years experience and works internationally on behalf of a variety of commercial and public sector clients, from SMEs to major blue chips.
It operates on a 'no-savings, no fee' basis - if the team don't save you money, you don't pay a penny.
By using its expertise and market knowledge, the consultancy can achieve the best possible reduction in costs and consumption.
The consultancy has information systems at its fingertips which facilitate informed decision making on the energy markets, and identify optimum times to buy and renew contracts.
In conjunction with its daily discussions with traders on the market floor, this activity allows McKinnon and Clarke to deliver accurate, timely views in a proactive manner, optimising market negotiations on behalf of its clients.
For more information about how to manage your energy expenditure, contact McKinnon and Clarke by phone or via the new website.
www.mckinnon-clarke.com.
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