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You can get ready for competition, too Featured

10:06am EDT July 22, 2002

Business owners are being bombarded by new energy-service companies heralding the new era of energy deregulation. What should you be doing to take advantage of this activity?

First, position your company to evaluate the myriad of new service opportunities and, eventually, negotiate for the best energy price. It's not just a lower price for the kilowatt-hour that will affect the bottom line. It's the new array of products and services (and providers) for managing energy usage that will provide the benefits of deregulation.

Get busy, right now

You won't be in on the new savings curve unless you get busy, right now. Here's how:

  • Know your energy costs.

  • Do a fast cost/benefit analysis.

  • Calculate impact on product cost and profitability.

  • Calculate what you can afford to spend on knowledge.

  • Develop your vocabulary and awareness of services.

  • If you choose to expand your knowledge, be sure to analyze historical usage data. Set up a system to track energy usage.

Timing is everything

Energy management can save up to 10 percent (before the rate cut) of your energy bill. Question: Does 10 percent in energy savings amount to anything? Look at actual bills or ledgers. There are two ways to calculate the annual expense.

  • Nominal amount. An annual energy bill of $5,000 per year can net 10 percent savings of $500 per year. If your bill is $10,000 per month, 10 percent savings equal $12,000 a year. How much effort is it worth to save $500? $12,000? Do your own cost/benefit analysis.

  • Percentage of total expenses. Compare the amount of the energy bill to total corporate expenses or cost of goods sold. Will a 10 percent decrease have a measurable impact on product, service, or corporate profitability?

Either way, nominal amount or percentage of expenses, the results of the arithmetic (or a more extensive financial analysis) should drive the business decision.

Take advantage of available resources

To take advantage of the new energy milieu, you have to start with the language. Try to expand your vocabulary in the jargon of the energy business. Tracking the regulatory proceedings is not preparation for understanding the wide range of products and services already available or on the horizon. Try this instead:

  • Check out the Internet using "energy management" or "power quality" or "energy user" as a query string.

  • Try www.energyusernews.com/testmenu.htm for a series of short, simple, and well-written articles to educate the non-specialist.

  • Subscribe to Energy User News (it's from Chilton and it's free).

If warranted, investigate usage patterns

The results of the previous calculations will give you an idea of how much money your business can afford to spend on extensive and detailed analyses.

With deregulation, the cost of energy will vary by industry and company, service provider, time of day, quantity used. Detailed knowledge including time of day, season of year and peak usage will be important to realizing savings in the near-term and comparing future rate proposals.

Check out new services and new providers

Awareness, usefulness, and availability of the following services will continue to grow, and offer new ways for you to do business in the energy age.

  • Power quality audits. Advances in microprocessor technology have increased equipment sensitivity to variations of power flow on the customer premises ("power quality" in industry jargon). There are technical terms, but research indicates that most (80 percent) of power-quality problems are not caused by the electric company. Reasons include overloaded circuits, inadequate wiring or poor motor maintenance. A power-quality audit will identify the cause so solutions can be recommended.

  • Distributed generation. As energy pricing varies, companies may determine that backup generation and on-site generators are a cost-efficient means to manage peak requirements or momentary outages.

  • Smart meters. Advances in microprocessors and chip design have advanced the technology and miniaturization of meter design and capabilities. Combined with wireless telecommunications networks, services never before available at a modest cost will become common.

Some examples of new services available or anticipated are:

  • Automatic meter reading. No more appointments with meter readers and no more estimated bills. Services may also include submetering and/or load metering.

  • Billing options. AMR plus new software can mean one bill for many locations, customer-selected billing date and other levels of billing detail.

  • Control devices, processes or equipment. Switch systems on/off based on price of energy, time of day, external events.

  • Energy information services. Printed reports, analytical software, Internet accesses to real-time billing data.

  • Rate variations. Based on time of day, season of year, short-term gluts and shortages.

  • Bundled services. Energy will be offered as a part of a package of services by wholesalers and retailers. Example: XYZ company may offer dial tone line, long-distance services, HVAC maintenance, electricity, detailed usage data, and a smart meter for a single monthly fee.

  • Buying clubs and buyers alliances. Customer aggregation means that many companies can get together to negotiate as a group.

  • Consultants. Experts are available to provide usage data acquisition and analysis services. Negotiation services, rate analysis services, contract analysis and comparison services are on the way.

Carol A. Heiberger is president of Energy & Telecom, based in Philadelphia. She works with electric utilities to create new products and services.

Using historical data to analyze energy usage

Analyzing historical data relating to how your business consumes energy can save you money. Here's how to do it:

  • Collect previous bills.

  • Call your energy suppliers and request historical detail reports on your energy usage. Some do, some don't.

  • Gather company records, calendars, operations logs or time sheets to pinpoint increases and decreases in energy use.

  • Using your records, estimate high- and low-energy usage by time of day, day of week, month of year, and so forth. Record this information on a blank calendar. Color coding should help.

  • Create graphs and charts.

  • Compare operations activity to billing data, keeping two things in mind:

  • Note when and how kwh rate changes take place

  • Compare apples to apple: for example, January rate structure with January operations activity.

  • Little changes can result in big savings. One commercial printer, for example, saved $20,000 per month by starting up his presses 10 minutes later in the day.