The best strategies for negotiating with energy suppliers

Your business success depends on negotiating favorable terms for the goods and services you use and provide. Savvy business leaders know the benefit of exploring your options, asking about pricing possibilities, and evaluating service providers. Because energy is often a leading cost for many companies, negotiating the best terms possible with your energy provider is vital to controlling the energy line item in your budget. Arriving at the right deal means asking for the terms and price structure you need. Here are some strategies you can use when negotiating with energy suppliers:

Research

How will you know what constitutes a reasonable price or favorable terms if you have no context? You can only feel confident you’ve found the best deal for your unique circumstances once you understand the market and what is available.

Compare prices across providers, but don’t stop there. A low price locked in for four months might not be as advantageous to your business as a slightly higher rate locked in for 24 months. Look at all the terms and consider how they work with your company’s priorities.

Be sure to consider all the variables before deciding which energy plan is best for your organization. Contract length, costs, fixed or variable rates, sustainability, time-of-use plans, and many other factors determine a contract’s suitability and desirability. Each element affects the others. When researching available contracts, look at all the terms. After careful consideration, you may choose to stay away from a low-rate plan that could end up costing you more because the hours you use the most energy have a time-of-use upcharge or a longer lock on prices that doesn’t offer the sustainably sourced energy you value.

Understand what isn’t negotiable

Specific components of an energy contract are non-negotiable. Exactly what terms are off-the-table for negotiation will vary by region and country. In general, taxes and transmission charges are fixed rates or amounts. The energy company doesn’t set these and can’t negotiate them.

Keep your eye on conditional or temporary discounts

If you press an energy provider for a better deal, they may come up with a discount on the rate. That’s a great thing, especially if their discounted price and overall terms are the best option you’ve found for your business’s needs. However, keep an eye on a conditional discount that offers a percentage off a set plan for only a period of time. Your rate may default to the full amount when that discount expires in 12 or 18 months.

If your contract length extends beyond the discount period, you will pay full price for the remaining time. If your contract ends at the same time as the discount, you are better positioned. However, you must remember to renegotiate and renew your contract with new terms and pricing to avoid continuing at the undiscounted rate.

Also, be mindful of discounts that hide higher prices. A 10% discount may sound appealing. If the starting price is 12% higher than the competition, it’s not actual savings. Don’t let offers of discounts prevent you from comparing final prices and terms against other utility providers’ options.

Use other providers’ terms as a baseline

If you’ve done your research, don’t be afraid to take the terms from one provider and ask another to match or beat them. If another utility company has offered you a 10% discount with similar starting rates and terms, tell your current provider they need to match that to keep your business. Or tell a new provider what your current terms are and let them know your business may be available if they can offer you something better.

Ask for their best rate

When you’ve received the details of a plan, one easy negotiating strategy is to ask for their best offer. Whether that’s the lowest base rates, a conditional discount, a longer term on the fixed rate, or something else, you won’t know if there’s something they are holding back until you ask. Make it clear you are considering moving your contract to someone else. Then, ask what the very best they can do for you is. Electricity companies may roll out a ‘secret’ plan they’ve been keeping in reserve to keep or secure your business.

Let the experts do it for you

Perhaps you are uncomfortable negotiating. Maybe you are too busy with your company’s other concerns to have time for research and multiple calls or meetings with various energy providers. Whatever your reasons, you can delegate the job to commercial energy management companies.

Energy consultants will do all the research and negotiation on your behalf and spend time with you to help you understand the available options. They will get to know your company’s concerns and find an energy procurement strategy and contract that dovetails with your budget, priorities, use patterns, and other considerations. They have existing relationships with energy companies, which they can leverage to get better pricing or terms on your behalf.

Being mindful of how you approach contract renewal time can save your business money on energy costs. Armed with information or expert assistance from an energy procurement consultant, you will be in an excellent position to negotiate terms with energy providers.