The Definitive Guide to Hiring An Energy Advisor, Part 5: Independence is Key
In this final installment of our five-part series, “Definitive Guide to Hiring an Energy Advisor,” we will discuss the importance of engaging an independent energy advisor. It is important that the advisor solely represents you and your goals – as opposed to the goals of some third-party affiliated supplier or vendor. Independence is only truly achieved when your energy advisor is not part of a larger energy efficiency company and is not directly affiliated with any particular electricity or natural gas suppliers.
No Competing Goals
When you hire an energy advisor, it is for the express purpose of assisting your organization with attaining the best energy policy to achieve your goals. Part Two of the Guide talks about the importance of engaging an advisor who provides a full suite of services – but, then clarified, this does not mean an advisor who promotes energy efficiency solutions along with procurement guidance (supply-side vs. demand-side).
There are two distinct buckets when it comes to energy:
Supply-side has to do with energy procurement – lowering the cost you pay for the energy you use.
Demand-side pertains to energy efficiency – reducing the amount of energy you use.
As we will discuss further in this installment, you are always best served by engaging separate advisors who are experts in each bucket. Trying to take a shortcut by hiring one advisor to handles both your supply-side and demand-side energy needs can lead you down the wrong path. While under the same umbrella, these are two different and distinct goals. You need to employ a form of checks and balances that can only be achieved by hiring two different and distinct teams, one to focus on supply-side issues and the other to address demand-side solutions.
No Additional Agendas
Let’s focus on the supply-side energy advisor for a moment. As the one coordinating the evaluation process for said advisor, you want to ensure that (a.) the focus is on the strategy at hand and (b.) no new or hidden agendas will pop up. So we will look at two examples that can lead to problems, and how best to address each.
First, what about the advisor who works with one or just a certain number of select energy suppliers? The goal is to have this advisor conduct a procurement process leading to the supply of energy for your organization. You want this process to be as open and transparent as possible, where all legitimate suppliers can compete for your business to find the best deal. If you are working with an advisor with just a select number of relationships, the agenda can easily digress from obtaining the best energy supply solution for you, their client, into getting business for their supplier.
Another situation occurs when the energy advisor who should be focusing on your supply-side strategy is owned by or a part of a larger energy efficiency company. In this scenario, upselling you new energy-related equipment or energy efficiency solutions could take precedence over advising you on securing the best rate. You then find that the advisory engagement has now turned in to a sales pitch for, say, a new chiller or an entire HVAC system. At a minimum, this diminishes the value of the energy advisor, whose focus should be on securing better rates and solutions for your supply.
No Conflict of Interest
A conflict of interest arises when focus shifts from benefiting the client to benefiting the advisor. Certainly, the above scenario of representing an energy supplier’s needs over your needs, as the client, is a clear conflict of interest. But it bears further discussion as to how conflicts can arise when working with an advisor who is not independent by virtue of affiliation or ownership by an energy efficiency or equipment company.
When an energy advisor is also part of an energy efficiency or equipment company, you now have goals that fall within both the supply-side and demand-side energy buckets. Any time you look at a demand-side solution, this is typically evaluated in light of return-on-investment (ROI). The ROI is a direct function of your energy rates – if your energy rates are high, then the ROI is much shorter, making the demand-side solution more attractive. The conflict of interest arises when the advisor is not supporting the total reduction of your energy rates because keeping the rates higher leads to a better ROI… resulting in the sale of potentially millions of dollars of energy-efficient equipment or solutions. Procuring lower electricity rates, for example, could change the ROI on a $1 million lighting retrofit from 2.5 years to 4 years, leading you to decide not to proceed with the retrofit.
The bottom line is that you need the supply-side energy advisor separated from your demand-side activities. This creates the checks and balances necessary to ensure you are getting the best solutions from all sides.
A True Advocate for the Client
Your evaluation of any potential energy assistance all boils down to whether the advisor is there to advance your interests or the interests of some other company. The only way to ensure that your advisor functions as your advocate is to make sure they are truly independent – and not part of some larger energy company that sells or provides competing solutions.
You want an energy advisor who sits on your side of the table and evaluates all options in a transparent manner, with your goals in mind. Then, as you consider demand-side or energy-efficiency solutions, the advisor can maintain a neutral, third-party oversight of the process. This leads to a valuable long-term relationship with a trusted advisor who will guide you through an energy procurement process that best suits your organization.
Bob Wooten, C.P.M., CEP, is Director of National Accounts for Tradition Energy, and has over 20 years of experience managing commercial, industrial and governmental procurement programs for a wide variety of clients. Bob holds professional certifications from the Association of Energy Engineers and the Institute for Supply Management, as well as a B.A. from Texas A&M University, and a Master’s in Public Administration from the University of Houston.