Utility Savings Do Increase Net Income
Oct 07, 2009
During a discussion with the CEO of a client, he asked if I’d review the Company’s utility expense for possible savings. Unknown to me, he contracted with a utility broker and executed a five year agreement. As part one of my due diligence, I contacted the broker to discuss the agreement. My thought was that the per kWh rate appeared above the current market rate. The broker turned out to be one of those exasperating individuals who never directly answer’s a question.
As part two of my due diligence, I researched suppliers in the eastern part of the United States and found a number of suppliers who were willing to provide a response to my Request for Proposal (“RFP”). It turns out that the market was somewhat cheaper than my client’s contracted price. In fact, it was approximately 2.4 to 3.0 cents per kWh less expensive. At 3 million kWh’s per annum, my client would save approximately $310,000 for a three year period.
I negotiated with two large suppliers and ultimately chose one, Constellation Energy. While my client may have to pay a penalty to the supplier he contracted with, his company will save over $300,000 during a three year agreement and more importantly, reduce the years under contract from five years to three.
