Energy Buyers: Outsourcing Continues to Grow
A panel of energy buyers at GasMart/Power 2000 agreed last week
outsourcing energy management is still on the upswing as end users
strive 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 too
Jackson Mueller, director of energy for the Seattle-based
privately-held Simpson Investment Co. said his outsourcing
arrangements have cut the company's energy budget from $142 million
a couple of years ago to $18 million for this year. Simpson owns
land worldwide and is heavily involved in the wood and paper
industries. He attributed the cuts to a combination of outsourcing
strategy and a new initiative by the owners of the firm to cut
"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 operations
people and accounting staff get a dollars worth of energy/ton of
product figure and don't have to worry about capital budgeting for
the different resources. We've done outsourcing arrangements with
almost all our plants."
Mueller added that another benefit of outsourcing is its ability
to allow companies to focus on its core competencies. "If we can
get someone to offer us all the [energy management services] under
one umbrella so that we ultimately only have to operate our
business, that is our objective."
The panelists said the advent of deregulation in many markets,
improving technology to switch fuel supplies, a growing number of
financial and physical supply options and risk management have made
procuring energy a daunting task.
One outsourcing trend that has developed is an apprehension by
many buyers to sign with "energy service provider extremes (ESPs),"
said Glen Lewis, the western region procurement manager for
Stockton, CA-based Del Monte Foods. He said customers are finding
that large ESP's customer service operations are lacking in many
cases, while signing with small ESPs raises the question of
Although admitting the outsourcing trend is still growing, Ewing
said Procter & Gamble only outsources special projects. The
consumer products giant spends $220 million annually on gas and
electricity. Its energy procurement group, in which Ewing is
included, made the decision to develop a team in-house to manage
the company's energy costs. Since then, the group has worked to
gain regional knowledge of electric and gas distribution as well as
sign contracts with energy suppliers.
"What we're looking for are suppliers who offer customized
products, specific industry expertise, superior customer service
and are financially stable. They need to be able to align with our
needs, even if the needs change rapidly, and sign a deal with a
simple contract process. They need to deliver what they promise."
John Norris, Denver
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