Let me tell you something that sounds made up but isn't: most private equity firms treat energy like it's a fixed cost. It's not. It's one of the most controllable line items in a portfolio company's operating budget — usually running 3% to 8% of revenue for industrial portcos, and sometimes north of that for cold storage, plastics, or food processing. And across a portfolio of 15, 25, 40 companies, the cumulative overpayment is enormous.

We've audited enough portco energy contracts at this point to say it plainly: the average PE-owned company is overpaying on electricity and natural gas by 15% to 30%. Sometimes more. Across a mid-market fund, that's easily seven to eight figures of missed EBITDA — which, at a 10x multiple, is real equity value at exit. Nobody's looking for it because everyone assumes it's already handled.

Why This Keeps Happening

PE operating teams are busy. They're running 100-day plans, managing add-ons, fixing ERP systems, re-platforming salesforces, cleaning up receivables. Energy procurement ends up buried three layers deep in the G&A function at the portco level, usually handled by a facilities manager or an office manager who signed whatever contract the last broker put in front of them.

Here's what that typically looks like in practice:

• Auto-renewals: Roughly 60% of the portco contracts we review have auto-renewed at least once. Auto-renewal rates are often 20-40% higher than competitive market rates. The supplier is effectively counting on inattention — and getting it.
• Single-broker relationships with no competitive bidding: The portco has "their guy." Their guy has been presenting the same two suppliers for five years and calling it a market. That's not procurement. That's a pen pal.
• Default utility rates: In deregulated markets, some portcos are still on the utility's default service — which is almost always the worst rate available. Pure inattention tax.
• Unaudited bills: Meter errors, incorrect demand ratchets, misapplied riders, sales tax on non-taxable usage — pick any four and odds are one of them is on the portco's current bill. Nobody checks.
• Siloed decision-making: The 23 portcos in the PE firm's portfolio are each negotiating their own contracts independently, with zero aggregation, zero benchmarking, and zero leverage. Suppliers love this.

Why Energy Is Such a High-Leverage EBITDA Play for PE

Here's what makes energy different from most operating expense categories: the savings drop straight to EBITDA with no revenue risk, no customer risk, and no organizational disruption. You don't have to fire anyone. You don't have to change a product. You don't have to raise prices. You just renegotiate a contract you were going to renew anyway.

Run the math on a representative mid-market industrial portco:

• Annual energy spend: $2.4M (electricity + natural gas)
• Savings from competitive procurement: 22%
• Annual EBITDA impact: $528K
• Value at 10x exit multiple: $5.28M

That's one portco. Do the same exercise across a portfolio of 20 companies averaging $1-3M in energy spend each, and you're talking about $80M to $120M of enterprise value that currently isn't showing up in anyone's investment committee memo. And the only thing you had to do to capture it was run a proper RFP.

The Three Mistakes We See Most Often

When we engage with a PE firm on a portfolio-wide energy review, the same three patterns show up almost every time.

Mistake #1: Treating energy as a facilities problem instead of a finance problem. The person signing the energy contract usually isn't the person responsible for hitting EBITDA. That disconnect alone costs millions. The CFO should own the vendor selection — or at least sign off on it. Facilities can manage the meter; finance should manage the contract.

Mistake #2: Confusing "having a broker" with "running a competitive process." A broker sitting on a single supplier relationship is not a procurement function. A real process solicits 10-20 competitive bids across multiple suppliers per market, normalizes the terms (bandwidth, pass-throughs, early-termination fees, REC obligations), and presents a decision-grade comparison. If the portco's current broker isn't doing this, they're not running a process — they're just processing paperwork.

Mistake #3: Letting each portco fend for itself. A portco doing $800K in annual energy spend has modest supplier leverage on its own. Twenty portcos collectively spending $30M have massive leverage — if (and only if) someone is aggregating the volume in a way suppliers can price against. Most PE firms never do this. Suppliers price each portco individually and pocket the difference.

What a Portfolio-Wide Approach Actually Looks Like

Getting this right isn't complicated. It's just disciplined. Here's the playbook we run for PE operating partners:

• Step 1: Inventory. Every portco, every meter, every contract, every rate, every expiration date, loaded into a single master schedule. Most firms have never seen this document. Building it takes 2-3 weeks and immediately reveals the low-hanging fruit.
• Step 2: Benchmark. For every portco, compare current all-in rates against current market rates in that state and zone. This tells you, in dollars, which contracts are underperforming and by how much. Now you have a prioritized action list instead of a hunch.
• Step 3: Aggregate where useful. Portcos in the same deregulated market (say, five companies across PJM) can be aggregated into a single RFP that suppliers bid on collectively. The discount for scale is real — typically 5-15% beyond what each portco would get individually.
• Step 4: Standardize contract terms. Push all portcos onto a consistent contract framework — same bandwidth, same pass-through language, same termination provisions, same term-length logic. This makes future renewals faster and eliminates the contract-specific landmines that suppliers love.
• Step 5: Monitor continuously. Markets move. Rates change. A fixed-rate contract signed 18 months ago may now be 30% above market. A good advisor tracks this monthly and flags portcos approaching renewal windows 12 months out, not 12 days out.

The Value-Creation Angle Nobody Talks About

Everyone on the PE side talks about EBITDA improvement. Energy procurement checks every box: it's recurring, it's high-margin, it's low-risk, it doesn't require headcount, and it's genuinely repeatable across portcos. From a value-creation-plan perspective, it's the kind of play that should be on page 2 of every portco's 100-day plan — right after pricing discipline and working capital.

But there's a second angle too: at exit, a clean, well-benchmarked energy cost structure is a diligence asset. When the buyer's CFO runs their own quality-of-earnings work, they're going to probe cost lines. A documented, recently competitive energy procurement file is exactly the kind of thing that reassures them instead of raising questions. Messy energy contracts with auto-renewals and unaudited bills don't help anyone's exit.

Our Recommendation

If you're an operating partner or a CFO at a PE firm reading this and thinking "I have no idea what our portcos are paying for energy" — that's the right reaction, and the fix is straightforward. Pull the last 12 months of utility bills and supplier invoices from five of your portcos. Hand them to someone who can benchmark against current market rates. You'll know within two weeks whether this is worth pursuing at the portfolio level.

In our experience, it almost always is. The question isn't whether the savings exist — they do. The question is whether anyone at your firm has bothered to go find them yet.