Energy Procurement: The Most Neglected Line in Your P&L
Every finance leader knows the drill: labor, materials, logistics, IT – every big cost gets scrutinized. Then there’s energy. For most mid-market companies, energy sits buried under “utilities” on the P&L. It’s treated as a fixed necessity, not a controllable driver of margin. That’s a mistake. In deregulated U.S. markets, energy procurement isn’t a static line item. It’s a volatile asset that can either erode or protect EBITDA. Ignore it, and you’re leaking cash every month.
Why Energy Procurement Gets Ignored
Procurement teams chase the categories that scream loudest: suppliers, vendors, strategic projects. Energy rarely makes noise until it spikes. And by then, it’s too late. The silence creates the illusion of control – but it’s a dangerous illusion.
- Energy is technical: Metering, load profiles, capacity factors. It’s a language most finance leaders don’t speak.
- Energy is fragmented: Multi-site portfolios complicate management. Each site renews at different times, under different terms.
- Energy is time-consuming: Every supplier pitches differently, with opaque terms. Busy CFOs delegate it and assume it’s handled.
The result: energy spend drifts. Costs compound quietly. Leakage spreads across the P&L – unnoticed until the board asks why expenses are creeping up against budget.
The Real Cost of Neglect
In a mid-market business with $50M–$500M in revenue, energy spend typically ranges from $500k to $5M. At those levels, a 10–20% variance translates to hundreds of thousands in lost EBITDA. Finance leaders wouldn’t tolerate that kind of drift in any other category. Yet it happens in energy all the time.
- Auto-renewals: Suppliers roll contracts forward at inflated rates. Companies sleepwalk into 15–25% overpayments.
- Misaligned hedges: Single-site contracts ignore usage diversity, forcing you to pay a blended rate that subsidizes the supplier’s risk.
- Hidden pass-throughs: Capacity charges, balancing fees, transmission costs – all adjustable, all exploitable.
- No portfolio strategy: Treating every site in isolation prevents scale leverage and increases volatility exposure.
Add it up, and neglected energy procurement isn’t just sloppy. It’s value destruction. In finance language: unmanaged energy procurement is a recurring EBITDA drag.
Case Studies: The P&L Effect
Case A: Retail Chain
A multi-state retailer ignored staggered renewals. Five stores rolled into auto-renewals at 18% higher than market. No one noticed until the annual accounts review. Total leakage: $420k. EBITDA dropped 0.6% that year.
Case B: Manufacturing Group
A manufacturer treated energy as “utilities” and left it with facilities. The supplier applied variable pass-through charges mid-contract. Finance realized only when monthly variance exceeded $80k. Over three years, losses topped $1.1M.
Case C: Logistics Provider
Energy procurement was delegated to an admin. Supplier pitches weren’t benchmarked. They locked into an inflated fixed rate. The company overpaid $750k across 36 months. Operations margins collapsed during a tight freight market.
Energy Procurement as Financial Strategy
The CFO’s role is to control financial risk. Energy is financial risk – pure and simple. Prices swing daily. Suppliers engineer contracts to protect themselves. Left unmanaged, that volatility eats margin. Managed properly, energy procurement is a lever for predictability and control.
- Cashflow stability: Locking the right terms reduces budget shocks.
- Margin protection: Independent benchmarks stop overpayment leakage.
- Governance credibility: Demonstrating energy oversight builds confidence at board level.
Finance leaders who reframe energy procurement as part of enterprise risk management shift the narrative. Energy stops being a passive line item and becomes an actively managed asset.
The Roadmap to Control
Fixing neglected procurement requires a simple but disciplined framework:
- Portfolio visibility: Map every site, every meter, every contract renewal date.
- Market benchmarking: Compare supplier offers against real-time wholesale curves, not sales pitches.
- Governance cadence: Review energy risk quarterly, like you do FX or interest rates.
- Supplier accountability: Enforce transparent contracts that eliminate pass-through games.
Implementing this roadmap doesn’t just stop leakage. It turns energy procurement into a controllable driver of predictable performance. That’s what boards want: visibility, stability, and zero surprises.
Put Energy on the CFO Agenda
Energy spend isn’t a utility bill. It’s a financial risk hiding in your P&L. Treat it that way. If your current contracts roll forward without scrutiny, you’re leaving margin on the table. Get a benchmark. Know exactly where leakage sits. Arm yourself with a board-ready strategy for control.