Energy: A look back at 2005; what to expect in 2006

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For executives responsible for the bottom line, be it facilities, operations or overall finances, 2005 will certainly be a year for the record books. The main reason–energy. In fact, energy management was listed as one of the top three threats for business earlier in the year. With understanding the new Energy Bill, regulations from Sarbanes-Oxley, and the fact that energy prices have more than doubled since the same period last year, many top business executives have had their hands full dealing with the intricacies of energy management.

In 2005, two major hurricanes struck the heart of America’s oil and natural gas production areas, at one point, shutting in more than 70% of the entire energy production capacity. And, after years of cooler than normal summer periods, the United States experienced a prolonged period of warmer-than-normal temperatures during the summer of 2005.

Add to that significant geopolitical issues in key energy producing areas, such as Russia, Central America, and the Middle East, and it would be an understatement to state that the worldwide supply chain is in a state of flux. These issues, coupled with the demand for oil surging in developing countries such as China, have put further pressure on energy prices.

In 2006, certainly in the near-term, energy experts believe that this upcoming winter could be an exceptionally tough period for businesses, particularly multiple site businesses such as retailers, banks, and grocers. To make matters worse, if winter 2006 is in any way colder-than-normal for a majority of the continental United States, the existing state of high prices could rise even more dramatically upward. And, although the early weather predictions for this winter are mixed, the tight energy supply situation is well known; in fact, over 40% of U.S. production capacity still remains unavailable due to hurricane damage.

For most businesses, this means a renewed focus on taking measures to reduce the amount of energy being consumed, in addition to seeking lower prices. Proactive and comprehensive management of energy expenses is a reality, and many such businesses have taken positive steps to stay ahead of the situation–enabling them to stay ahead of their competition and bring a consistent return to the bottom line.

One suggestion from Cadence is that during periods of rising energy prices, customers with sites in certain deregulated utility markets, such as New York, Michigan, Illinois, and Maryland, discontinue their existing supplier contracts and return back to utility-supplied generation. Additionally, in both regulated and deregulated markets, there are excellent opportunities for customers to apply for lower distribution rates from many local utility companies–savings that always go directly to the bottom line and are without any risk.

Overall, experts agree that although energy and gas will likely continue their volatility and general increase in pricing, there are proactive measures businesses can and should take. Businesses can directly mitigate this volatility through proactive energy management through business intelligence, realize hard dollar savings and labor efficiencies, and cut down on the use of energy and other operational expenses.

Cadence Network, Inc. delivers comprehensive utility, telecommunications and lease facility expense management to chain stores, multiple site businesses and government. More information can be accessed here.

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