Budget planning for effective energy cost management

Oct 31

Is energy budgeting tricky? More of an art than a science?

There are 3 essential tools that higher ed clients, hospitals, and budget-conscious energy buyers should employ as you plan for the 2017/2018 budget cycle.

1. Know what happened last year.

 

Energy markets in 2016. On a macro level, the early party of 2016 saw consistent and steady declines in power and gas markets. The news on this subject was everywhere. In the early part of the year, forward markets for gas and electricity fell by 20% or more. (The historic lows occurred in April 2016.) The latter part of the year (late summer through early Fall) saw a return to volatility, though we continue to operate in markets that are near historic lows. How and whether your organization has been able to make the most of this decline will depend on your contract terms and purchasing strategy. Schedule a 10 minute call with us if you’re interested in a quick strategy review.

2. Understand your facilities and your costs.

 

Know what you paid and how it compares to market trends.

Take a look at what you paid and how it compares to market trends before you submit your budgets.

Cost and usage profile. Get a handle on the impact of energy costs on your budget last year.

Did your institution meet your budget goals over the past year? Were there any major changes to usage or facilities? Did your energy usage profile change? Did your tariff or contract rates change? Have you invested in renewable energy technologies or on-site generation? How will these investments impact your budgets going forward?

3. Develop a reliable forecast using forward looking data.

 

You have to know where you've been to have context for where you're going

You have to know where you’ve been to have context for where you’re going

Effective forecasting. Bring together a forecast of usage, a view of your contracted, uncontracted and utility delivery costs and forecast your monthly budget accordingly. If possible, determine any risks around those monthly costs and help your colleagues understand the risks to meeting your budget goals.

Track your costs monthly so that you can identify the cause and impact of any deviation from your expected budgets.

Read more about the value of a consistent, ongoing energy cost management process here. 

Bottom line for finance and energy experts: Energy budgeting does not have to be overwhelming. Just like energy cost management best practices, there is a process and an approach that will help you save time and take the mystery out of budget planning. 

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