A panel of energy buyers at GasMart/Power 2000 agreed last weekoutsourcing energy management is still on the upswing as end usersstrive to avoid complexity and save money.

“A lot of people are giving up on managing their own supplies,”said Joe Ewing, a strategic sourcing manager for Procter & Gamble Co., “in the sense that [energy management] is getting toocomplicated.”

Jackson Mueller, director of energy for the Seattle-basedprivately-held Simpson Investment Co. said his outsourcingarrangements have cut the company’s energy budget from $142 milliona couple of years ago to $18 million for this year. Simpson ownsland worldwide and is heavily involved in the wood and paperindustries. He attributed the cuts to a combination of outsourcingstrategy and a new initiative by the owners of the firm to cutoperations.

“We’ve had choices and been terrorized by them,” Mueller said.”As a result it has led us to outsource to other people. We just[account for it] as energy services… That way, our operationspeople and accounting staff get a dollars worth of energy/ton ofproduct figure and don’t have to worry about capital budgeting forthe different resources. We’ve done outsourcing arrangements withalmost all our plants.”

Mueller added that another benefit of outsourcing is its abilityto allow companies to focus on its core competencies. “If we canget someone to offer us all the [energy management services] underone umbrella so that we ultimately only have to operate ourbusiness, that is our objective.”

The panelists said the advent of deregulation in many markets,improving technology to switch fuel supplies, a growing number offinancial and physical supply options and risk management have madeprocuring energy a daunting task.

One outsourcing trend that has developed is an apprehension bymany buyers to sign with “energy service provider extremes (ESPs),”said Glen Lewis, the western region procurement manager forStockton, CA-based Del Monte Foods. He said customers are findingthat large ESP’s customer service operations are lacking in manycases, while signing with small ESPs raises the question ofreliability.

Although admitting the outsourcing trend is still growing, Ewingsaid Procter & Gamble only outsources special projects. Theconsumer products giant spends $220 million annually on gas andelectricity. Its energy procurement group, in which Ewing isincluded, made the decision to develop a team in-house to managethe company’s energy costs. Since then, the group has worked togain regional knowledge of electric and gas distribution as well assign contracts with energy suppliers.

“What we’re looking for are suppliers who offer customizedproducts, specific industry expertise, superior customer serviceand are financially stable. They need to be able to align with ourneeds, even if the needs change rapidly, and sign a deal with asimple contract process. They need to deliver what they promise.”

John Norris, Denver

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