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Energy Insights

The Reverse Auction: 7 Ways to Reduce Your Costs

Auctions were once the preserve of the grand, the formal, the stuffy, selling items like fine art, antiques and jewellery. Then the internet came along and put a new spin on things. Now, smart businesses are using online auctions to reduce costs – not inflate them – through eProcurement. Energy Action has been at the forefront of this reverse auction revolution. So just how does a reverse energy auction drive costs down? Here are 7 amazing ways.

#1. Accelerates contract award.

Traditional offline tender processes can take weeks or months, depending on the complexity of the tender. A reverse energy auction, however, can be set up in next to no time and takes only 10 minutes (or up to 15 minutes in some circumstances) from start to finish. This drastically reduces tender preparation time while vastly accelerating the time to contract award.

#2. Ensures real market pricing.

There can be a great deal of uncertainty for energy retailers in a traditional tender. So it’s not unusual to see inflated prices with tender-cost-of-sale margins. Online live energy auctions deliver transparent prices from other suppliers, so it’s clear to all bidding retailers where the market is. The result? Greater certainty for retailers and prices that truly reflect market pricing for the customer.

#3. Increases competition.

The catalyst for competition in the energy market was, of course, deregulation. In the past 15 years or so, as state governments have allowed private companies to compete in the energy market, multiple energy retailers have emerged. Now there are over 30 retailers. Energy auctions have driven competition further as they not only allow retailers to compete on price but also get a clear understanding of how competitive they are in the market.

#4. Standardises offer comparisons.

Before the auction, Energy Action gathers the customer’s energy data and information so bidding retailers know precisely what the energy requirements are. For the reverse auction, retailers submit their offers in a common format, through a single platform. This means the offers are standardised so comparisons are accurate.

#5. Validates retailers.

Another benefit of retailers understanding the customer’s energy requirements before the auction is that it ensures their offer matches those requirements. In fact, best practice reverse auctions incorporate processes that ask retailers to check their offers as well as confirm them in any re-bidding. For retailers, it minimises costly errors and extra work, while for customers it validates the retailers as being able to deliver on their energy needs.

#6. Improves processes.

Reverse Auctions improve the process of energy buying immeasurably. They help procurement professionals establish comprehensive category plans, and, by their nature, reverse auctions standardise RFP preparation, publication and evaluation. In short, energy auctions are more efficient, more streamlined, and more cost-effective.

#7. Reduces costs for retailers and customers.

Ultimately, everyone benefits from online reverse auctions. Retailers: through smarter, more streamlined processes; better understanding of how competitive they are; and knowing that a customer has committed to a contract. Customers: through being able to choose from multiple retailers; accelerating the contract award; knowing that their requirements are met; and above all, achieving a competitive rate.

Smarter, faster and more price-competitive, a reverse energy auction through Energy Action gives your organisation the opportunity to substantially reduce your energy costs and lock in long-term pricing. Perhaps it’s time you said… “Bring on the auctioneer!” 

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