Why an Effective Cost Management Strategy is Important for Your Business

Energy cost is a considerable part of any organization’s operating budget – and an important one to get right. However, some businesses with abundant electric and natural gas accounts across many regions and utilities find that cost management is challenging and best practices are difficult to implement. For some, effective cost management results in administrative burdens and additional costs to internally manage through multiple departments including accounting, bill payment and budgeting.

Implementing a strategic approach to cost management can alleviate many of these burdens. In fact, a comprehensive and systematic approach will likely result in cost savings, increased transparency of spend and optimization of your budgeting process. In this edition of Customer Insights, we will discuss what a holistic cost management approach is and why it’s important to consider for your business.

What is a Cost Management Strategy?

A holistic cost management strategy typically includes consolidated account management, bill pay coordination, spend forecasting and variance analysis and rate analysis and optimization. By comprehensively understanding your energy usage, spend and energy rates, you can establish cost management objectives for your organization and implement a framework to evaluate usage, rates and costs that will yield long-term optimal results.

To effectively implement an optimal energy cost management strategy, it’s important to start with an analysis of your organization’s historical energy costs, energy usage and rate structures that can be coupled with historical and forecasted electric, gas, and renewable market analysis.

After completing this analysis and fully understanding market rates and your historical and forecasted usage, your organization will be ready to establish objectives and implement an execution plan that assists with bill consolidation and payment strategies, corrective action for incorrect utility bills and more. In addition, reporting and transparency will be key to ensure programmatic success. The continued reporting and forecasting objective is to disclose progress related to the baseline measurements and extrapolate energy insights on spending, opportunities, and cost reductions.

AEP Energy’s Cost Management Services

AEP Energy executes five different services that increase spend transparency, and ultimately optimize utility fiscal processes such as budgeting, variance tracking, and accounting. These services include:

  • Consolidated Account Management helps organizations gain visibility of their entire portfolio through turnkey reports to track energy spend, cost fluctuations, and increase benchmarking capabilities for variance tracking.
  • Rate Analytics and Corrective Action Services analyze rates across deregulated and regulated energy markets to find optimal rates for cost reductions and tariff opt-out opportunities.
  • Bill Payment Services consolidates bills and ensures that bills get paid on time through a third-party provider. It reduces administrative complexity and simplifies back office support through consolidation and outsourcing to financial experts.
  • Budget Planning & Spend Forecasting focuses on a historical analysis of energy spend, rates and forecasted energy market rates that can aid in the budget planning process with a degree of certainty on energy spend.
  • Optimized Cost Savings Opportunities will be the ongoing, continuous analysis of usage and rates to identify cost reduction opportunities, minimize bill payment transactions, and simplify utility costs.

Our comprehensive approach to energy management takes a holistic and programmatic approach to achieve consistent results in cost management. Our experts can implement an execution plan that is aligned with your organization’s priorities and based on market, economic and usage analytics. We have experience working directly with utilities and suppliers to triage issues and have deep financial expertise to develop world-class variance reports and usage/spend projections down to a site level. 

Interested in learning more?
If you’ve found this blog informative and would like to learn more, please contact us.

AEP Energy does not guarantee the accuracy, timeliness, suitability, completeness, freedom from error, or value of any information herein. The information presented is provided “as is”, “as available”, and for informational purposes only, speaks only to events or circumstances on or before the date it is presented, and should not be construed as advice, a recommendation, or a guarantee of future results. AEP Energy disclaims any and all liabilities and warranties related hereto, including any obligation to update or correct the information herein. Summaries and website links included herein (collectively, “Links”) are not under AEP Energy’s control and are provided for reference only and not for commercial purposes. AEP Energy does not endorse or approve of the Links or related information and does not provide any warranty of any kind or nature related thereto.

Up Next

Timing Your Energy Contract Decisions – Best Practices to avoid Bad Markets

Cost Management

Smart and savvy energy buyers know that a well thought out energy procurement strategy is critical to realizing long-term cost savings. However, many procurement managers do not dedicate as much rigor to it as necessary. This often leads to them being caught up in challenging energy markets or making uninformed decisions on their purchase, that …