How to leverage your utility budget Featured

10:05am EDT July 22, 2002
Small- to midsized firms have always spent large sums of money on electric, gas and telephone service. These expenditures have risen even higher as cellular phone, pagers and Internet access have become necessities. Until recently, small businesses have had fewer choices and paid higher rates than larger firms, but changes in regulation and technology are now giving commercial customers opportunities to manage and control these expenditures like the "big boys."

Smaller companies, however, have fewer choices. Smaller firms someday may be able to buy utility services through industry groups or chambers of commerce, but that hasn't happened yet.

That has, however, helped companies such as Insights Unlimited form small-business utility-buying consortiums aimed at helping companies navigate the changing waters of communications and utility services.

How is this possible? The Telecommunications Act of 1996 effectively removed legal barriers separating communications and energy providers. State-led energy deregulation efforts mandate competition. As a result of these legislative changes, the number of providers is increasing rapidly.

Banding together can help your bottom line, but many firms find it difficult to take advantage of these new opportunities. Keeping track of the choices and technologies that are available can be hard enough, but figuring out which combination of plans is best may seem impossible. Few smaller firms can afford to have a full-time utility manager to analyze their company's total energy and communications needs. Consequently, most are paying more than necessary for utility services.

Try these basic approaches to manage your business communication and energy expenses:

  • Many entrepreneurs are tempted to try to figure out their energy options all by themselves. This option wasn't bad when the only choice was to pay the single "small commercial" rate for telephone or electric services. But as technology and regulation change, these decisions become more complex. How should I balance cellular and long-distance spending? What do electric and gas competition mean to my business? What is my firm's load profile? The answers to these questions now impact your bottom line.

  • Another approach is the "single vendor" approach. The major long-distance companies have popularized the idea of buying multiple services from the same company. AT&T, for example, is pushing long distance, Internet and (in some areas) local phone service. Some energy companies are offering to sell you all of your electric, gas and telephone services. In many cases, bundled rates are available. These suppliers may also provide a single bill that shows all of your utility expenditures.

  • A third option is to hire an outside expert to manage your communications and energy expenditures. A utility-management company can analyze your company's needs and fill them from the least-costly sources. This approach gives you the benefits of an expert who is dedicated to your firm, and avoids potential problems associated with locking in all of your business from a single supplier. A utility manager will also be able to show you how your company's utility expenditures compare with those of similar firms.

The approach you take depends on how much your firm spends on communications and energy, your internal human resources and your attitude toward experimentation.

Eric Malm is director of research at Insights Unlimited, Devon, Pa.