We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.
Business

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

What is Energy Purchasing?

Malcolm Tatum
By
Updated: May 17, 2024
Views: 5,881
Share

Energy purchasing is the process of contracting with vendors to purchase various types of energy produced by those vendors. The purchasing process may involve electricity produced using traditional and alternative methods, natural gas, propane, or oil. While many of the clients who engage in energy purchasing are cooperatives or municipalities, corporations operating mega-facilities sometimes seek to minimize energy costs by contracting for different utilities.

The main focus with most energy purchasing ventures is to secure the best possible energy pricing for each unit purchased. For this reason, many energy contracts are structured as volume purchase agreements. Essentially, the buyer agrees to purchase and use a minimum amount of units within a given time frame. In exchange for this commitment, the seller extends a highly competitive rate per unit.

An energy purchasing contract of this type will sometimes utilize what is known as tier pricing. Above and beyond the minimum amount specified in the agreement, the buyer may receive additional discounts if the usage exceeds the projected average monthly amount. For example, if the buyer contracted to use 20,000 units of a given type of energy during the month of March, the seller would extend a discount off the cost of the units used during the month of April.

While buyers can contact sellers directly, it is often advantageous to secure the services of an energy consultant. Consultants can help the client evaluate their energy needs and identify potential vendors who can meet those needs. At the same time, the energy purchasing consultant can represent the client, negotiating the best possible pricing and terms.

In addition to energy purchasing deals that focus on securing electricity from traditional sources, it is also possible to do business with producers of energy generated with alternative methods. This can be especially important for buyers who are advocates of the environment and want to be as green in their energy usage as possible. Buyers can negotiate with firms that produce energy using solar energy or wind power, and seek to purchase large volumes at green pricing that is acceptable to both buyer and seller.

Municipalities sometimes engage in energy purchasing as a means of providing a full range of utilities to citizens. In this scenario, a city would establish volume contracts with a power producer as well as providers of natural gas. In turn, the city resells the energy to citizens living within its jurisdiction, making it easy for people to establish a central utility account rather than dealing with multiple vendors. The city also makes a profit from the venture, which can often keep local taxes to a minimum while also supplying the city with resources to maintain essential services such as a fire department and a police force.

Share
WiseGeek is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Malcolm Tatum
By Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing to become a full-time freelance writer. He has contributed articles to a variety of print and online publications, including WiseGeek, and his work has also been featured in poetry collections, devotional anthologies, and newspapers. When not writing, Malcolm enjoys collecting vinyl records, following minor league baseball, and cycling.

Editors' Picks

Discussion Comments
Malcolm Tatum
Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing...
Learn more
Share
https://www.wisegeek.net/what-is-energy-purchasing.htm
Copy this link
WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.

WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.