Buying Power— What It May Cost You To Save Money

Abstract

The foundation of a competitive energy market is transparent
competition wherein marketer bids and contract terms are visible to
the end user so that a true apples-to-apples comparison may be made.
To secure such comparable pricing, end users may seek informal price
quotes, pursue a request for proposals (RFP), or use open or blind bid-
ding procedures (e.g., an auction).
Many end users in deregulated power markets assume that such
procedures will automatically result in cost savings. While often true,
costs may be incurred in the procurement process, and contracts may
include additional charges beyond the stated price. Some of those costs
may rival or consume much of the savings from competitive procure-
ment.
Minimizing those costs is an essential part of maximizing real sav-
ings in deregulated markets. Doing so may involve use of an energy
procurement consultant, employing online auction software, combining
demand response and procurement contracts, and other techniques.
Understanding these efforts, and what they may cost, is the first
step to saving money through the procurement process. Based on direct
experience handling or overseeing many power purchase agreements,
ranges of such costs are provided along with ways to trim or eliminate
them.