6 Pitfalls to Avoid In Utility Cost Management

Sometimes the best place to look for money is right under your nose.

How many of us overlook simple savings that are right in front of us? These days everyone is busier than ever, and that’s why it’s especially important to prioritize the things that count. Saving money counts!

At Cost Control Associates, we are in the business of analyzing and managing costs related to utility expenses. We have saved millions of dollars for our clients, yet when talking to prospective clients, one of the primary objections I hear is, “My national account rep helps us with that.” Or they trust their bill-processing-and-payment vendor to go the distance for them. Our experience is quite different.

When these prospects eventually come to us for a secondary review, we typically find significant cost savings opportunities. In fact, we produced more than a million dollars in refunds and cost savings for a national retail client that thought its costs were under control.

Many companies are missing the cost-savings boat. Here’s why:

Reason #1

Your national utility account rep is essentially a sales and customer service professional.

To keep their best customers happy, utility companies often assign a national account representative. Your rep keeps an eye on your accounts and is there when you have questions. He or she looks at the different rate opportunities that may be available to you under regulated utility rate tariffs. That’s good, but it’s not good enough.

Reason #2

Your utility rates should be calculated based on your organization’s usage and purpose.

Your national account rep has access to rates but is probably not calculating those rates according to your specific needs. If your account rep does do calculations, he or she uses the tools at hand, and those tools are supplied by the utility company.  You may be eligible for a rate that charges you one amount for peak-hour usage and another amount for off-peak usage, based on percentages that apply to a universal rate class. In reality, your facilities do not operate at those pre-determined percentages and might be better suited to another class. A comprehensive review of your usage history—done by experienced, utility-independent energy analysts—would lead you to a more customized, cost-efficient solution.

Reason #3

Not all utility company account reps are created equal.

Our analysts work with utility account people daily. There are some outstanding individuals who have been in their positions for years. But other utility companies may have a fair amount of turnover, so there’s a chance your rep is not as experienced. If your rep is not dedicated to your account, you may talk to different people each time, and that causes problems, too. But either way, utility account reps are limited by the tools they are given by the utility company.

Reason #4

Not all bill processing-and-payment vendors are the same.

You need to choose carefully, especially if you are relying on that vendor to manage your rate choices. These companies use programmed automated rate engines to search through pre-loaded rates to determine if there might be another rate available to you. Someone may recommend an available—but not necessarily the most beneficial—rate for your organization. While this practice can yield some savings, it bypasses the details relevant to your situation and often fails to identify the optimal rate.

At Cost Control Associates, we add the extra scrutiny that comes with human intervention. Our analysts—whose industry experience averages 14 years—understand your organization, its business hours, operations and utility usage. Armed with that information, they are better equipped to look at the rules, rates and regulations outlined in your utility’s tariff with an eye toward what can benefit your organization.

Reason #5

Many companies, especially in deregulated states, do not recognize the savings opportunities available to them.

People think a utility bill is a utility bill, and that there isn’t a lot they can do about their rate structure in regulated utility territories. What they may not realize is that, even in those areas that are deregulated, there is still a regulated distribution component of the bill. In New York State, the distribution cost on electricity makes up two-thirds of the bill. In most deregulated states, the distribution part of the bill is 50% or more of the total bill. There may be other rate options.

Reason #6

People are reluctant to take on a new project. They think it’s easier to stick with the status quo.

Employees are busy, and they naturally work on the projects they perceive to have the most value. Unfortunately, a lot of people don’t take the time to understand the value they’d gain through a detailed review of rates and billing. The type of work we do takes very little of your time. We do need some bill data to get started, but we do all the work while keeping you in the loop. Even when it comes to getting refunds, we make the calls and verify the payments. For cost savings, we produce a report from which you choose the items you want us to pursue. We make the calls, handle the negotiations and keep you posted.

We find refunds and cost savings for more than 90% of our clients. The opportunity is there. The question is whether you will save tens of thousands—or millions—of dollars.