Why Energy Procurement Can Benefit You

Q. What is energy procurement?

A. Electricity and natural gas supply and delivery is controlled in many states by a local utility company within a protected service area, which means customers typically don’t have a choice when it comes to supplier or price. Today, however, many states, including New Jersey, Pennsylvania and New York, have deregulated the supply of energy, which encourages competition by offering customers a choice of supplier, price and contract term. Energy procurement firms such as Langan Energy Solutions will analyze a business’s historical usage data, create a customized energy supply and risk management strategy and execute the plan that best meets a business’s needs. Depending upon the business’s risk threshold, it may elect to lock into a guaranteed price for a specific length of time or it may choose a variable pricing plan that fluctuates with the market. In the case of a variable pricing plan, the customer’s price is a percentage of the wholesale cost, so there is a built-in guaranteed savings regardless of the direction in which the wholesale price moves. Another option is a combination of the fixed and floating options. Businesses that do not make a choice are served by a default provider — usually the local utility — at rates set by state regulators. The default rates are often the most expensive.