One of the most popular mistakes is believing that energy costs are lower in the spring or fall. Energy futures are affected by a variety of factors, and there is no predictable seasonal trend.

FREMONT, CA: Contracts that last 3-6 months or are month-to-month are considered short-term. These are some important reasons and considerations to ponder when choosing short-term market rates.

Reasons for short-term energy procurement include:

• High current and potential market pricing;

• Tactical business execution

• Day-to-day sourcing requirements

• Meets needs of today

Pricing

When market pricing is strong, the approach should be to either remain on the utility default rate if it is lower than what the market is offering or enter into a short-term contract to satisfy the need before the market drops. One of the most popular mistakes is believing that energy costs are lower in the spring or fall. Energy futures are affected by a variety of factors, and there is no predictable seasonal trend. It is essential to keep an eye on the markets for buying opportunities at all times.

Time Frame for Renewal

There is more space for error with shorter periods in place. If the administrative team is already spread thin, it can be time-consuming depending on extra time spent on contract renewal. Renewals should be handled well ahead of expiration dates; but, with such short time frames, the administration risks missing renewal dates, resulting in higher prices and less negotiating space.

New to the market

There is less potential to quantify historical data and utility demand over time for newer commercial and industrial operations. To strategize the best long-term deal, historical data is needed. In this scenario, a facility may be better off signing short-term contracts before assessing the company's full scope of utility requirements until it is up and running and has more than a year's worth of data to factor into strategic procurement models.

Time at Property

Analogous to being a newer operation, if the time at the current property is less than a year, it may benefit the overall strategy to use shorter-term contracts.

In particular, short-term contracts are beneficial in some circumstances. They do, however, leave room for longer-term strategies that fit with company goals over time. Short-term energy procurement meets immediate needs but can result in money being left on the table.

See also: Top Procurement Solution Companies