As a business owner, why should you care about energy budgets? Can’t you just add a 5% increase to last year’s expenses and be good to go? Unfortunately, the answer is, no. This mindset can cause big problems when reconciling one year to the next. While items like rent, labor and healthcare may rise gradually over time, energy is extremely volatile and can rise and fall with dramatic shifts.
What are the factors that impact your annual budgets?
Weather is an obvious variable – how hot a summer will be and how cold a winter will be cannot be predicted . Over the past two years, we have seen the warmest winter on record, the year of the polar vortex, and a change in heating degree days ranging from 20% above normal to 20% below normal.
Wholesale pricing moves on a supply and demand marketplace, which is tied to weather and to many other factors. When you buy, and the type of contract you execute, could swing your cost component over 50-100% — from high to low. With generation or commodity pricing moving up and down with market trading, the recent trend has revealed a steep increase in ancillary pricing. Ancillary costs include capacity, transmission, renewable standards, and more. These cost components are trending to 50-60% of the overall fixed pricing and are moving up significantly in some markets.
Lastly, utility delivery costs are a real expense in your budget and are something that needs to be accounted for. Does the utility have a rate increase planned? Are you on a demand-based rate, and your peak billing demand is up?
As you can see, there are a tremendous number of variables in driving your expense projections. Reconciling these costs is a 365 day per year process. Albireo, backed by its UtilityModule platform, is an expert in creating budgets and tracking the market changes. If you are budget sensitive and need to plan for expense changes, Albireo will give you the tools and account management you need to be on top of every aspect of the process.
Contact [email protected] to get a free demo of how UtilityModule will give you the most accurate and reliable budgets.