Total energy (electricity and natural gas) end use costs in North America total approximately $400 billion annually; approximately $230 billion is spent by businesses on energy. Energy costs rank surprisingly high among business costs (as high as third for many businesses). And, because energy costs are very volatile, the relative impact on business performance can be even greater.

Energy procurement and supply management are very difficult and demanding. Regional, state, and local distribution territory markets are heterogeneous; prices are volatile; the set of suppliers and their offerings are regionally diverse; state and local distribution territory regulations and rules vary substantively; and all of these factors change with time. This is particularly challenging for businesses with many facilities in many states. Plus energy management is not a core competence for most companies; consequently it is very often a part-time responsibility. Even companies with energy management departments find the challenges new and daunting.

Yet, as Energy markets deregulate and become competitive, the price of energy is expected to remain volatile and, over time, to decrease. This presents opportunities for buyers to manage energy costs to their advantage and for suppliers to increase their market share. But both buyers and suppliers need better information in order to find opportunities, to make decisions, and to manage risk. Buyers need solid energy management strategies and straightforward processes to help them choose energy sources wisely. Suppliers need simple, cost-effective ways to present their offerings competitively and to acquire customers.

The opportunities and challenges of energy supply management and procurement exist both in regulated and deregulated (competitive) markets. But they are both more substantial in deregulated markets. And managers responsible for energy procurement and supply management are usually less familiar with the deregulated markets, particularly electric. The complexity and dynamics are particularly substantial in markets in transition, like most deregulated electric power markets.

There are three steps in providing energy to end users, with slightly different terminology for gas and electricity:

Generation is the production of electrical energy. Electricity generators typically use coal, natural gas, or nuclear fuel. Renewable ("green") resources-such as biomass, wind, and solar energy-are other fuels used in the production or generation of electricity. Natural gas production includes activities such as exploration, drilling, and storage. Transmission involves moving electrical energy between the generation source and local electric distribution systems. Electricity transmission occurs at relatively high voltages. Natural gas transportation involves the movement of gas long distances through interstate pipelines from the source to local distribution systems. In the U. S., the Federal Energy Regulatory Commission (FERC) governs interstate transmission and transportation while state regulator agencies govern most intrastate transmission and transportation. Distribution is the movement of energy from the transmission or transportation system to end-users. Compared with electricity transmission, electricity distribution is at relatively low voltages. In the U. S., distribution services are typically governed by state regulatory agencies. Delivery service is provided by the local, regulated utility. Distribution service is always included as a part of delivery. Transmission and transportation may sometimes be included as a part of delivery as well. Supply service always includes electricity generation and natural gas production. In some areas, transmission or transportation are also considered to be part of supply. Under deregulation, competitive suppliers-including, possibly an unregulated subsidiary of the local utility-offer supply service.

During the transition of energy markets to deregulation, the local utility company may be required to provide default service to customers who do not choose to or cannot receive supply from a competitive supplier. The cost of this service is referred to variously as the comparison cost, price to beat, cost to compare, or shopping credit. In selecting a supplier when default service is available, consumers should determine this comparison cost before evaluating and accepting offers form competitive suppliers.

A good analogy for energy supply services and their deregulation are found in telecommunications. Long distance service is analogous to energy supply and delivery service is analogous to local telephone service. Under deregulation, local phone service and energy delivery remain regulated and are provided by monopoly local utility companies regulated by state public service commissions. Long distance telephone and energy supply services are unbundled under deregulation, may be provided by competitive suppliers, and are generally regulated by federal agencies.

Gas markets in most states have been deregulated, particularly for business customers, for approximately a decade. Consequently, they are relatively mature and sustainable. A map showing the status of gas deregulation in the US, although more focused on residential consumers, is available in the Department of Energy (DOE) Energy Information Administration (EIA) web site at http://www.eia.doe.gov/oil_gas/natural_gas/restructure/restructure.html. Approximately 72% of business gas expenditures are for facilities in deregulated states.

Electricity markets began to be deregulated only five years ago. Currently 16 states and the District of Columbia have deregulated their electricity markets. A map showing the status of electricity deregulation is available at http://www.eia.doe.gov/cneaf/electricity/chg_str/regmap.html. However, competitive activity levels vary within states that are deregulated. The EnergyWindow PowerScape energy market knowledgebase shows current state competitive electric market activity levels. Active sustainable competitive electric markets exist in approximately 12 states-most of them more highly populated and industrialized states-that account for approximately 49% of the business energy usage in the US.

Thousands of businesses have saved millions of dollars in deregulated energy markets. Even in California, nearly 10% of the business customers, more than 20% of the business load, switched suppliers in the first two years of deregulation in order to save money. They also isolated themselves, until the California assembly and public utility commission "reregulated" the industry, from the risk of high and volatile power costs. And many businesses still have choices in California that can make significant differences in energy costs. Approximately 20% of the business customers-40% of the business load-switched in Pennsylvania in the first two years of deregulation. And Pennsylvania remains an active competitive market. Many opportunities exist today in competitive energy markets.

And as the PowerScape map shows, many states are sustaining competitive electric markets; gas markets have been deregulated much longer and, consequently, are much more widespread.

At the same time, businesses cannot avoid significant energy risks. Businesses that opted not to sign agreements for alternative power supply and to stay with default service in California saw their electricity rates-already the highest in the nation-more than double. Nor were the largest regulated utilities, like PG&E, which filed for bankruptcy, safe havens from energy risks. On the other hand, many businesses that signed with Enron there and in other states faced possibility of their funds, and hands, being tied up in bankruptcy proceedings and having to find new service providers. During the same period, the price of gas has ranged from below $2.00 per million cubic feet to over $8.00. Businesses must understand and actively manage energy risks today.

EnergyWindow^® was conceived as a way to provide energy users and their suppliers with higher quality, more accurate information than ever before, making it easier to identify and quickly act upon profit opportunities. Whether you are an energy buyer or seller, we offer a full complement of solutions to help you save time, money and positively impact your business' bottom line. Beginning with energy strategy and supply management, EnergyWindow can assist your enterprise in developing a comprehensive program to drive down energy costs. Our performance management offerings help you to benchmark and track cost and usage data so you stay on strategy. We also provide a wide range of decision support tools and information to help you spot and seize attractive openings in the market. Our flagship offering, the EnergyWindow energy sourcing tool, gives qualified buyers easy access to a wide range of nationally known, quality energy suppliers. EnergyWindow has helped numerous businesses succeed in reducing their energy costs and is active in helping shape the future of energy deregulation. From full-service energy management outsourcing to focused solutions, EnergyWindow is the expert resource for business energy users.