All the energy cost management advice you’ll ever need…

Sep 29

On an index card….

Harold Pollack, a professor at the University of Chicago, believes that all the investment advice that anyone will ever need should fit on an index card. The thinking is that financial advice has been needlessly complicated, and that the basic principles should be easy to understand and straightforward. You can find a copy of Professor Pollack’s card here.

Registered Investment Advisor, George Sisti, recently posted an article in which he delved more deeply into the concept and reviewed what he liked, and what he thought was missing. Sisti provided thoughtful input on the topic. It is worth taking a look.

We have developed our own version of this advice, but for energy professionals and finance folks involved in energy cost management. Like Pollack and Sisti, we think energy cost management has been needlessly complicated. There may be many reasons for making it seem complicated. That’s another topic. What we find troubling about this is that decision makers don’t feel competent and spend a lot of extra time and money trying to make sure that everyone is accountable, without ever having the ability to know for certain how they’re doing. In this technological age, all of that uncertainty and extra cost is unnecessary.

We also agree with many of the points George Sisti made in his MarketWatch article. We note the pieces of advice that he helped contribute to our thinking below.

1. Get real data and forecasts of cost and usage.
2. Know and set your targets for cost based on that data.
3. Communicate your targets and goals to your boss simply and clearly.
4. Make sure you can show your work.
5. Focus on your goals and strategy, then monitor the market.
6. When the market puts you in range of your target budget, act. Don’t react.
7. Incremental decisions deliver continuous results: focus on the singles and doubles and don’t worry about the home runs (Sisti’s MarketWatch article about investing also makes this point).
8. You can control the inputs to your strategy, not the performance of the market.
9. As George Sisti noted in his article about investing: “There is no perfect portfolio– yours should emphasize simplicity and shun complexity.”
10. You can do this yourself. It’s easier than you’ve been led to believe.

For those receiving help from an advisor:
11. Pay attention to fees and who pays whom.
12. Make your consultant or broker commit to a standard of integrity and transparency.
13. If you don’t do it yourself, make sure your advisor creates “a comprehensive and comprehensible plan to keep you on course.” (see Sisti, MarketWatch).
14. Trust, but verify.

In future posts, we will delve into details on several of these topics. This is our list. This is all you need to know to make good energy cost management decisions.

Bottom line for businesses: Messages surrounding energy cost management have been needlessly complicated. You have everything you need to be able to make good decisions for your business.

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