Getting Natural Gas Pricing Right
Exceptional customer and broker experiences are paramount to any business and promptly providing complete and clear pricing is often the starting point in a business relationship. Natural gas businesses capable of quickly generating complete and professional looking quotes that yield a profitable revenue stream enjoy competitive advantage and show a prospective client the business is organized, efficient, and is likely to be a reliable supplier of natural gas. The challenge is being able to consistently produce accurate pricing in a timely manner and then being able to follow contract pricing through its lifecycle to ensure intended revenue and profit are realized. Natural Gas businesses have shared with us that doing so is extremely difficult when using spreadsheets or clunky software; both requiring excessive data entry that is prone to human error and arduous to manage across the prospect/client lifespan. This makes a pricing process that enables fast, efficient, and consistent price quoting with live index and pricing data feeds not only a competitive differentiator, but also a necessity in the hotly contested Natural Gas industry.
From a C&I perspective, the pricing process is typically stepwise, from working up pricing and approvals to negotiating contract terms and contract entry. Each step along the way is subject to human error, which is why having controls and quality checks in place are essential. While a contract analyst may approve a sale, the person entering the deal can make an error, such as selecting the wrong pricing component (e.g. an Index or Adder). Regardless of how many software applications and spreadsheets are being used, invariably each is not updating the other, requiring manual entry and updating across the board. Additionally, once a deal is entered, there are typically no alerts in place to keep track that a contract is performing as it was intended – instead, it could be losing money or charging incorrectly. The faster a Natural Gas business catches and resolves pricing-related issues, the more likely it will realize the intended margin for a specific contract. This is why having a pricing quote engine in place that manages pricing, quoting, and contracting thru enrollment is vital to the business.
From a Residential perspective, pricing can seem more simplistic, but dealing with the utilities and rate management is always a challenge. Some utilities only permit 30 active rate codes. While 30 rate codes might sound like a lot, it really isn’t. If a business needs to update its fixed rate pricing several times a month and has a few variable rates, in the span of only a few months, the rate code limit will be exceeded. Compounding this are states with monthly price increase regulations depending on the product type. This creates the need for several rate codes that aren’t attached to current advertised pricing and several other rate codes for step up variable rates. Being able to internally track rates for an individual customer and customer groups, their next rate, and regulatory limitations on how they can be priced from one state to the next is paramount. Book growth and new market expansion add to the complexity, representing more and more rates that must be tracked correctly and accurately. It is all too common that customers fail to be moved to their next rate or are moved to an incorrect rate. Regardless of the correct rate update being sent to a utility, such updates are routinely applied incorrectly. This requires ongoing monitoring, analysis, audit and correction, when rate management is handled manually. Rate management by software designed specifically for the complexities of the natural gas industry addresses all of this, protecting the top and bottom-line interests of the business.
Producers, LDCs, Marketers, Pipelines, and Utilities face increasing competitive and compliance pressures, requiring increased operational efficiency, data integrity and process improvement. Their operational systems must support this, but most don’t. Engage us and we’ll show you how to make a breakthrough. It’s what we do for natural gas companies, and we are experts in our field.
~Ken
