Any business owner will tell you that running a business involves risk. But few know as much about quantifying and managing energy risk as John Elder, CEO of LEGACY Energy Solutions. A Houston-based, full-service energy management firm, LEGACY serves more than 350 clients across multiple industries in both regulated and deregulated markets. In a time of remarkable energy price volatility and wrenching dislocations for businesses of all sizes, the firm enjoys a 97 percent customer retention rate and credits much of its success to effectively helping businesses reduce costs and manage energy risk.
In support of the colloquialism, 'It's what you don't know that can kill you,' John notes that "one-half of our mission is educating companies of all sizes on the value and approaches to measuring energy risk, the other half is implementing a strategy to manage their specific energy risk."
"Most businesses have a very top-level understanding of energy risk," says John. "For example, many may not understand counterparty risk. What is the impact on your business if the firm with whom you contracted power for cannot fulfill the contract's obligations? The impact can affect service delivery, wipe out current profitability and increase your future cost for power."
Typically calm and self-contained, John becomes animated when talking about energy risk management. "The impact is too big to ignore and needs to be a part of every business plan," he exclaims, gesturing with both hands for emphasis. "In 2008, energy prices fluctuated by more than 100 percent. This is why more and more businesses are outsourcing energy management to leverage expertise of people immersed in the market on a daily basis. You have to be able to identify and measure your risks to understand and manage them, so they don't destroy your bottom line."
John Elder CEO, LEGACY Energy Solutions
The founding of LEGACY came about due to the upheaval among utility companies that resulted from energy deregulation. During this period the utility companies' heaviest energy consuming customers were getting whipsawed by increasingly volatile prices and rate structures. As John remembers, "We saw how we could build a business that could provide real and valuable services by helping organizations understand how they use energy, what options exist for change in procurement, efficiency and in risk management to reduce costs and ensure greater predictability for their bottom line."
When asked what the future holds, John readily admits change will be the order of the day as new legislation, efficiency initiatives and increased competition for limited resources like oil and natural gas become critical issues. "We help our clients make the necessary and timely adjustments to capture new opportunities to control cost and manage risk."
As a closing note, John suggests that in these uncertain times, the best advice to business owners may be, "Engage good counsel, identify your strengths and weaknesses regarding energy buying, usage, measurement and risk tolerance and develop a sound strategy for improved energy management. In short, buckle your seatbelts because it is going to be a wild ride."
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