7 Ways Businesses Can Reduce Commercial Electricity Costs

Electricity can be a significant operating expense for many businesses. Manufacturers, warehouses, healthcare facilities, retailers, office buildings and multi-location businesses can consume substantial amounts of energy every month. Yet energy costs are sometimes treated as an expense that management simply has to accept. That can be a mistake. Businesses may have opportunities to improve how they purchase electricity, manage energy contracts and consume energy inside their facilities. Here are seven areas worth reviewing.

**1. Start by Understanding Your Energy Bill**

Before trying to reduce electricity costs, understand exactly what you're paying for. Commercial energy bills can contain more than a simple price per kilowatt-hour. Depending on your location, utility and rate structure, costs can potentially include energy consumption, demand-related charges, delivery charges, taxes, fees and other components. Start by reviewing several months of bills rather than looking at only one. • How much electricity are we consuming? • When is our usage highest? • Are costs increasing? • Are there seasonal patterns? • Are multiple locations performing differently? • When does our current energy contract expire? You can't manage what you don't understand.

# Review Your Commercial Energy Contract Before It Expires

Waiting until an energy contract is about to expire can reduce the amount of time available to evaluate alternatives. Businesses in competitive energy markets may have choices involving suppliers, pricing structures and contract terms. The lowest quoted rate isn't necessarily the only consideration. Companies should also consider contract duration, usage patterns, budget requirements and their tolerance for changing energy prices. For larger businesses, energy procurement can become a strategic purchasing decision rather than simply another monthly bill.

# Look for Energy Waste Inside the Facility

Buying energy intelligently is only half of the equation. The other question is: How efficiently are you using it? • Lighting • HVAC systems • Refrigeration • Motors • Compressed air • Building controls • Equipment schedules • After-hours consumption Some opportunities may require equipment upgrades. Others may involve relatively inexpensive operational changes. The objective should be to identify where energy is being consumed without producing corresponding business value.

# Pay Attention to Peak Demand

For some commercial customers, when electricity is consumed can matter in addition to how much is consumed. Large pieces of equipment starting simultaneously, heavy HVAC demand or concentrated production schedules can potentially create significant peaks. Businesses should understand whether demand-related costs are material to their particular rate structure and whether operational changes could reduce unnecessary peaks. Manufacturing and other energy-intensive operations may find this particularly important.

# Compare Locations

Businesses operating several locations have an advantage that single-site companies don't: they can compare facilities against each other. Suppose ten similar retail locations have comparable operating hours and square footage. If one consistently consumes substantially more energy than the others, management has a reason to investigate. The difference might involve equipment, HVAC performance, operating practices, building characteristics or another issue. Portfolio-level energy reporting can help identify locations that deserve attention.

# Evaluate Efficiency Investments Economically

Not every energy-efficiency project makes financial sense. That's why businesses should evaluate potential projects based on economics rather than simply purchasing the newest technology. • Project cost • Estimated annual savings • Expected useful life • Maintenance impact • Potential incentives • Estimated payback period A relatively inexpensive operational improvement with a short payback period could deserve attention before a large capital project.

# Treat Energy as a Managed Business Expense

Perhaps the biggest change is philosophical. Instead of treating electricity as "The bill arrives, so we pay it," consider managing energy as you would insurance, telecommunications, financing or another significant operating expense. • What are we paying? • Why are we paying it? • When does our contract expire? • What alternatives exist? • Where are we wasting energy? • What should we change? For companies with substantial energy consumption, even incremental improvements can become meaningful when considered across multiple facilities and years.

# Start With an Energy Review

Businesses don't necessarily need to know the solution before beginning the process. The first step can simply be understanding the current situation. Gather recent energy bills, existing contracts and basic facility information. Then evaluate purchasing, consumption and efficiency together. The objective isn't simply to find a lower electricity rate. It's to make better energy decisions that support the overall economics of the business.

# Mister Vincent Partners Strategic Partner Resource

Redstone Energy helps commercial organizations improve how they purchase energy, understand their energy portfolio and manage facility consumption through energy brokerage, consulting and efficiency solutions. Businesses interested in understanding their current energy position can request an Energy Review. Request a Commercial Energy Review with Redstone Energy

Disclosure: Redstone Energy is a strategic partner of Mister Vincent Partners. Mister Vincent Partners may receive compensation when readers use certain partner links or become customers. This article is provided for general educational purposes. Energy rates, contract structures, regulations and potential savings vary by location, provider, facility and customer.