Energy Procurement: The Most Neglected Line in Your P&L
Finance leaders pride themselves on squeezing value from every corner of the business. Headcount, marketing, inventory – everything gets reviewed, cut, optimized. But there’s one line that rarely gets the same scrutiny: energy spend. And in deregulated markets, that blind spot drains millions from mid-market companies every year.
This isn’t about reducing consumption. It’s about procurement discipline. The way you buy power and gas directly impacts EBITDA. Yet most finance directors treat energy procurement as a low-value admin task. That neglect is exactly what suppliers bank on.
Why Finance Leaders Miss It
The problem isn’t intelligence. It’s focus. FDs and CFOs are under pressure from all directions—M&A, debt covenants, payroll, tax, investor reporting. Against that backdrop, a supplier email about a renewal doesn’t feel material. It gets delegated. Or worse, ignored until the eleventh hour.
Suppliers exploit this dynamic. They know if they can catch you distracted, you’ll accept the path of least resistance. That’s how autopilot renewals and bloated margins survive. Not because leaders don’t care – but because they don’t realize the scale of what’s at stake.
What Neglect Looks Like in Practice
Case 1: A regional healthcare group renewed late on a “take it or leave it” supplier offer. Their rate came in 28% above market benchmarks. Across 12 hospitals, the hit to annual costs was $3.8M. Nobody on the board questioned it – because the contract looked clean and “fixed.”
Case 2: A multi-state logistics firm let sites negotiate independently. Rates varied wildly. Some sites were locked into favorable pricing, others were 40% above. The CFO had no consolidated view, and no leverage to renegotiate as a group. When they finally centralized procurement, they found $5M in avoidable costs sitting in plain sight.
Case 3: A food manufacturer assumed energy was “under control” because the supplier sent a glossy fixed-rate contract. Two years later, they discovered 35% of their charges were variable pass-throughs. The finance team had been reporting a “fixed” budget to the board – completely unaware of the exposure.
The Boardroom Blind Spot
Energy procurement rarely makes it to the board. And that’s the problem. It’s treated as an operational cost, not a strategic lever. But when you reframe it as a controllable risk – no different from FX hedging or debt structuring – it becomes obvious it belongs in financial governance.
Boards scrutinize headcount, debt, capex. They should scrutinize energy procurement the same way. Because the stakes are identical: protect margin, preserve cash, deliver predictable outcomes.
From Neglect to Discipline
The antidote to neglect is process. Three principles shift energy procurement from admin to strategic control:
- Visibility: Centralize data across sites. Know what you’re spending, where, and on what terms.
- Benchmarking: Test supplier offers against the real market. Never accept a rate at face value.
- Governance: Treat energy like any other financial risk. Build renewal tracking, approvals, and reporting into your finance function.
Do these three things, and you shift from reactive to proactive. Energy stops being a neglected cost. It becomes a lever you actively manage—just like working capital, tax, or debt.
Challenge Your Assumptions
If you’re reading this and thinking, “Our contracts are fine” – ask yourself: when was the last time you benchmarked them independently? When was the last time you tracked how much of your bill was true commodity versus pass-through? When was the last time the board saw a report on energy risk exposure?
Silence on these questions is the evidence. If you haven’t done it, you don’t know. And what you don’t know is already costing you margin.
Get Control of Your Neglected P&L Line
The Energy Consultant helps finance leaders expose the hidden waste in procurement and reclaim control. We benchmark contracts, dissect charges, and build governance. The result: clarity you can take to the board with confidence.