9 Ways Verisae Energy Cost Savings Whitepaper

9 Ways to Reduce youR eneRgy costHIGH-ROI ENERGY-PROCUREMENT IDEAS FOR

LARGE ORGANIZATIONS

By David Vranicar, Verisae

3/3/2010

For more information: Call us 612 455 2300 or [email protected]

9 ways to reduCe your energy Cost

IntRoductIon

For many large organizations that operate multiple facilities, the sim-

plest, fastest and least expensive way to reduce the cost of energy is to

refine your energy-procurement practices. Yet four key challenges may

have prevented your organization from achieving the benefits you other-

wise could:

You may not be aware of all the opportunities.

The topic can be complex, especially if you work with multiple utilities.

You need accurate, detailed data. In many organizations, such data

are not readily accessible in useful, actionable form.

Maybe you haven’t yet dedicated the right resources to the task. Or you

haven’t got the right processes or systems in place to a do a proper job.

The ideas you will read here are generally fast, straightforward, non-

disruptive and relatively low in cost to implement.

You will get the most out of this report if you fit the following description:

You are responsible for reducing the cost of energy in your organization.

Your organization consumes more than 10,000,000 KwH of energy in

a year.

Your organization operates in more than a dozen buildings and pos-

sibly on multiple sites.



3 Ways to thInk about youR eneRgy costsThis report focuses on ways to pay less for energy you buy.

Your energy-related costs fall into one of three categories:

1. The amount you pay your energy suppliers.

2. Your portfolio of energy sources, including utilities, on-site renewable energy, and purchased Renew-

able Energy Credits (or RECs).

3. The cost of maintaining the efficiency of equipment that consumes energy.

THE ENERGY SUPPLY SIDE VS. THE DEMAND SIDE

This and subsequent reports in the series address four substantially different but interrelated ways to

reduce total energy cost:

• Paylessfortheenergyyoubuy.

• Rebalanceyourenergysources.

• Uselessenergy.

• Findamoreoptimalbalancebetweenenergypricesyoupayandtheenergyyouuse.

A separate report addresses ways to reduce the cost of maintaining the efficiency of equipment that

consumes energy.

We refer to the first two ways to reduce energy cost as supply-side methods. The third method is

demand-side. The fourth is a hybrid of the first and third.

This report focuses on ways to pay less for the energy you buy. You will also find here a brief discussion of

the data, systems, processes, and resources you’re likely to need to implement the ideas suggested here.

9 Ways to Reduce youR supply-sIde eneRgy costs

To reduce the cost of energy you buy, consider making some or all of the following changes to your

energy-procurement practices:

1. Consolidate all your utility billing data in a single place where all parties in your organization can use

it easily.

2.Paythelowest-costtariffsyoucan.

3. In deregulated markets, choose the lowest-cost provider for your usage patterns.

4. Avoid overpaying your utility. Find billing errors.

5. Take advantage of all utility rebates and incentives.

6. Claim all the carbon credits you can.

7. Don’t let your utilities sit on large amounts of your deposit money.



8. When you open new facilities or locations, make sure you’re

billed at the most favorable rate from the start.

9. Take advantage of other special programs your utilities may

offer.

Congratulations if you’re already doing some or all of these

things. Our experience with more than 40 companies suggests

that you’re in the minority. You look to further reduce your en-

ergy costs on the demand side, as subsequent Verisae reports

suggest.

Even if you’re already doing many things well, please skim

through some of the detailed discussions that follow. They

may offer some nuances that can help you save additional

money.

1. Consolidate utility billing data in a single place where

all parties in your organization can use it easily.

Excel spreadsheets are the leading software application

used to manage energy data in organizations of all sizes.

There are plenty of solid reasons for their broad appeal

(sidebar, p. 3).

But they also have their limitations (sidebar, p. 4). To avoid these

shortcomings, you must invest a good bit of, well, energy. You

must invest enough forethought and coordination to use spreadsheets effectively. You may also have to

come to agreement across business functions with diverse needs. You may have to consider differences

across legal or regulatory jurisdictions, state or national borders, cultures and languages.

To help you navigate these complications, it may be wise to engage your IT organization or outside

consultants. Even with such help, you can still get it wrong unless you work with someone who has built

systems to manage energy before. It takes about three times to start getting it right.

If you feel ready to move beyond these limitations, you have several alternatives that can take you far

beyond what you can achieve with spreadsheets.

BEYOND SPREADSHEETS: DIGITAL SCANNING AND IMAGING OF BILLS

One useful next step is to scan and digitize your utility bills so their details are easily accessible online.

This enables you to capture all the data that can help you reduce your bills. It can also make such data

available for convenient use by multiple functions within your organization — including, for example, your

THE BEAUTY OF MANAGING ENERGY

WITH SPREADSHEETS



energy-procurement, energy-conservation, facilities, and

AccountsPayablegroups.

Be aware that making digital images of all your utility bills

available online is not the same as making all your energy-

related data searchable or reportable for everyone who

needs it.

CREATING AN ONLINE DATABASE

To make your utility billing data available for thorough report-

ing and analysis, you must capture it through keyboard entry or

optical character recognition (OCR).

Your biggest challenges will be to come to consensus on the

needs of all the groups who will use the data, to overcome any

internal resource limitations you may face, and to eliminate

data-entry errors.

IF YOU’D RATHER NOT DO IT YOURSELF

One alternative is to outsource the capture, presentation and

reporting of data from your utility bills. In doing so, you can

choose from a wide variety of utility bill-processing service

providers.

Many can set up a software application that captures all your

data and makes it easily (but securely) available to everyone in

your organization who needs it. Everyone can get all the data

they are authorized to see. They can prepare their own reports

and analysis.

You can capture all the data that appears on your utility bills, and you can see it in a presentation that’s

consistent across all utilities, regardless of their billing formats.

You can enter the data yourself or you can have the service provider do it for you. A very few service

providers (including Verisae) will guarantee 100% data accuracy.

You can pay your bills yourself or you can have your service provider do it for you.

In some cases you need only a web browser. There’s no need to buy computer hardware or to involve you

IT organization in setting up databases or data-transfer interfaces.

THE CHALLENGES OF MANAGING ENERGY

WITH SPREADSHEETS



2. In deregulated markets, choose the lowest-cost

provider for your energy usage patterns.

[Note: If all your operations are in regulated jurisdictions (side-

bar, p. 6), this recommendation won’t save you money. Skip to

suggestions 3 through 9.]

SeventeenU.S.statesordistrictscurrentlyenablebuyers

of electricity to reduce their cost by choosing their supplier

from among two or more competing utilities. (By contrast, you

have no choice of provider if you operate only in regulated

states.)

Similar deregulation has also occurred for natural gas, but

the opportunities for savings are generally smaller than for

electricity.

The best utility for your needs is not always obvious. It may be

that no single utility is the best choice for all your facilities, even

within a tight geographic area.

To evaluate the real cost for each utility you’re evaluating, you

will need detailed information about all available tariff schedules

from each utility.

The rate structures of competing utilities may be hard to compare side by side because utilities often

structure their rates in different ways. To make a proper evaluation, it’s important to understand which

components of the rate tariff are deregulated.

It is also important to understand what add-on fees deregulated suppliers may include in their rates. Find

the base-rate tariff for each utility so that you can make apples-to-apples comparisons.

In addition to looking at base rates, also consider any rebates, incentives or credits that each utility may offer

you to invest in improving your energy efficiency. (See more on this in Suggestion 3 below.)

If your operation has flexibility to limit your energy load during periods of peak demand, consider which

utilities offer the best incentives to do so.

To decide which utility or combination of utilities presents the most economical alternative overall, you

will need solid historical usage data for all your operations. The more granular and detailed your usage

data, the more confident you can be in making your decisions. And the more money you are likely to save.

Depending on the kind of supply contract you may execute with deregulated utilities, it may also be wise

to dedicated person to watch the market for ongoing opportunities to buy additional energy “layers” or

“blocks” when favorable market conditions arise.

WHAT DATA TO CAPTURE FROM YOUR

UTILITY BILLS



3. Pay the lowest-cost tariffs you can.

Assuming you know which utility companies you will buy

from, the next step is to be sure you pay the lowest tariff

rates for which you qualify.

This suggestion may not be as obvious as it looks. If

you’re a large enough user of energy and can shift your

load from one time of day to another, consider sign-

ingupforatime-of-use(orTOU)rate.Undersuchrate

structures, the amount you pay for electricity varies by

the time of day. If you can shed load during peak times

(i.e. midday) you can save money compared to paying a

flat, fixed rate.

If you operate multiple buildings or facilities — even if

only one or a few utilities serve them all — you may ben-

efit from getting the most economical tariff rate for each

facility.

Your evaluation gets much more complex if your organiza-

tion operates dozens, hundreds or thousands of locations

in many states or across national borders. The number and variety of tariff schedules is much greater, and

your volume of historical usage data is quite large. Your opportunity for savings is bigger still.

You have three options for getting this rate analysis done:

1. You can do it yourself, using internal resources and spreadsheets or whatever systems you use

now.

2. You can hire a service provider to do it for you each time you need it.

3. You can work with third-party software that enables you to do it whenever you like. With such sys-

tems in place, you can repeat the process any time you think your energy usage patterns or utility

tariffs have changed enough for you to reevaluate your options.

If you spend more than about $2 million a year on energy, you may find it economical to hire full-time or

part-time analysts to check the potential savings for each rate scenario.

If your internal systems are inadequate, if you face headcount constraints or you think your opportunity

for savings is relatively small, your best option may be to use third-party software that helps you make

your decisions. It will probably cost less than you think.

ENERGY DEREGULATION BY JURISDICTION



4. Avoid overpaying. Find and eliminate billing errors.

Do you have effective ways to identify and manage util-

ity billing errors? If not, you can probably reduce your

total energy spending by 1% to 3% by putting such

measures in place.

Utilitybillingerrorsaretypicallyofoneoftwotypes:

• Theutilitychargesyouahigherratethanyoushould

be paying.

• Theutilitymakesamistakereadingyourmeterand

charges you for more energy than you used.

In Verisae’s experience, the first error is much more com-

mon. But the more utilities you work with, the more oppor-

tunity you will have to uncover errors of both kinds.

Some organizations use their own resources or third-

party services to conduct periodic audits of their utility

bills. Verisae has worked with one company that discov-

ered a $3 million billing error through such an audit.

Periodicauditscancertainlyhelp.Butinternalauditing

groups may not be able to perform audits as often as

would be best for catching most errors. Any audit is time-

consuming and resource-intensive if you don’t have easy

access to utility data. And audits can be expensive if you

use outside services to conduct them.

USE SYSTEMS TO MONITOR YOUR UTILITY BILLS

As an alternative to performing audits, you can also set up systems and or services that will catch such

errors as they occur. This approach has these advantages:

• Itmonitorsforerrorsconstantlyratherthanperiodically.

• Youcancatcherrorsearliersoyouhavebettercashflowandcanputyourmoneytobetteruse.

• Youcanavoidnegativeeffectsonquarterlyfinancialstatements.

• Itmaycostlessthanperiodicauditing.

You may find it most cost effective to work with a third-party vendor that can provide utility-bill process-

ing services for you (sidebar, p. 7).

IF YOU DECIDE TO LOOK OUTSIDE FOR HELP



5. Take full advantage of rebates, tax breaks and

other incentives.

Is your organization overlooking ways to get help in paying

for your energy-conservation initiatives?

In many cases you can get some or even all the cash you

need without applying for loans. You may need to look no

further than your energy utility, which might reimburse part

or all of your costs.

Maybe this sounds too good to be true, but it’s not.

Many electrical and gas utilities offer their customers

rebates to encourage investment in energy-conserva-

tion measures. The payments cover equipment such as

heating, ventilation and air-conditioning systems, light-

ing, motors, occupancy sensors, cooking equipment

and more.

How common are such rebates? They are common enough

tomakeitworthwhileforyoutodosomeresearch.U.S.

electric and gas utilities collectively offered more than $3

billion dollars to corporations in 2008.

Utilitiesdon’toffertheseprogramsbecausetheyhave

deep pockets or big hearts. They do it because it’s more

economical for them to motivate you to reduce your

energy demand than to build more production or distribu-

tion capacity.

Ultimately,youpayforthebenefitwhetheryouuseitor

not. Where such rebate or incentive programs exist, you

and other utility customers finance them through surcharges to your monthly bills. These add-on fees

mayappearonyourmonthlystatementasa“PublicPurposeCharge,”an“EnergyEfficiencyRider”or

some such.

Although you and the utility’s other customers pay into the program, not all of you will get your surcharg-

es back in the form of rebates or credits. It takes more effort than some are willing to invest.

If you have adequate staff resources and the desire to explore your options on your own, start your

research by visiting the websites of your utilities and your state energy offices.

CHALLENGES IN MANAGING REBATES



If you choose to hire a service provider (sidebar), it’s important

to find one that understands utility rebate programs and also

understands the mechanical and electrical specifications of

energy-consuming equipment. Such knowledge and experi-

ence can help you in two ways. It can guide you toward alter-

nate equipment that may help reduce your energy consump-

tion in the future. And it can help you secure larger rebates

from your utilities.

6. Claim all the carbon credits you earn.

TheEuropeanUnionhasinitiatedasystemthatprovideseco-

nomic rewards for using energy from sources that generate

relatively low levels of carbon dioxide and other greenhouse

gases. The goal is to shift big energy users away from sources

believed to cause climate change.

TheUnitedStatesandotherindustrialcountrieshavealso

taken steps in the same direction. World governments appear

likely to continue offering economic incentives to reduce the

burning of fossil fuels that release large amounts of carbon.

Through one such arrangement, organizations can qualify for

carbon credits by reducing the amount of carbon released

by the energy sources they use. These carbon credits can be

exchanged for cash through regional climate exchanges (see

callout).

IF YOU DON’T MANAGE REBATES FOR YOURSELF

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THE VOLATILE VALUE OF CARBON CREDITS

Climate exchanges now exist in Chicago, London, Tokyo, Beijing and _____.

By operating the same way as the equity, bond and commodity markets, climate exchanges enable

supply and demand to set the value of carbon credits.

In these early days of the climate exchanges, the value of carbon credits can swing greatly. For ex-

ample, value fell dramatically – from $___ a ton before the Copenhagen Climate Summit in January

2010 to $0.10 a ton shortly after.

Because of such volatility, owning carbon credits is not like having money on deposit in an FDIC-

insured bank account.

But if you accumulate carbon credits when their value is low, it can be like buying equities when the

stock market dips. Your investment is more likely to go up in value than down.



Carbon accounting is an emerging field, and standards are only starting to be set by the Financial

AccountingStandardsBoard(orFASB).Practicesarecertaintochangeinthecomingmonthsandyears,

but that shouldn’t keep you on the sidelines.

Your best bet is to document everything you’re doing today to achieve energy efficiency. Your foresight

may qualify you for carbon credits down the road. If, for example, you’re retrofitting your lighting fixtures

to achieve greater energy efficiency, document it in detail now. Make sure your records are complete and

easily assessable.

7. Don’t let utilities sit on your deposit money.

When you open a new facility or establish a new energy account, most utilities will require you to pay a

deposit to ensure they will get their money even if you miss payments. Some utilities will accept a surety

bond or letter of credit in place of a cash deposit.

Rules vary by utility, but most utilities require you keep your deposit on file until you’ve established that

you consistently pay your bills on time. They may keep your deposit for a year or longer.

To get your deposit back as soon as possible (with interest, if your utility will pay it), track both the

amount of deposit you pay each utility and also the utility’s rules for getting it back. In Verisae’s experi-

ence, it can be a mistake to assume that all utilities will be proactive in returning your deposit money. You

may have to shake the tree to get it.

8. When you open new locations, be sure your utility charges you the most favorable rate from

the start.

When you build new facilities, most utilities provide energy at temporary construction rates until you open

for business. You can save money by ensuring that the transition from your construction rate to your

normal operating rate occurs quickly.

If you have similar facilities operating with the same utility service territory, you can use the billing history

for your established facility to determine the best rate for the new one.

If you don’t have such information, you may have to estimate the best rate until you’ve accumulated a full

year of baseline consumption data for the new facility.

9. Take advantage of other special programs your utilities may offer.

In addition to rebate programs, many utilities offer free energy audits, special rate tariffs tailored to

specific needs, or new programs to encourage you to conserve energy or at least to shift your demand to

off-peak hours. Research the website of each utility company or contact your utility account representa-

tive to determine if they offer these services.



SUMMARY AND CONCLUSIONS

This report has presented nine suggestions for reducing your energy costs on the supply or procurement

side.

Your ability to implement any of these recommendations requires ready access to good data that present

a clear picture your energy costs and energy-consumption patterns over time.

If you draw only one conclusion from this report, we hope it is this: If you aren’t doing so already, immedi-

ately begin capturing all the data that appears on your utility bills.

Whether you do this yourself or you look outside your organization for help is less important than getting

started now, however you can.

If you can’t do it effectively with internal resources and systems, we’d appreciate the opportunity to

discuss how we might help.

With our help you can start as small as you like and go at whatever pace you like. To get started with

Verisae is probably faster and easier than you imagine. It is probably also less resource-intensive, less

disruptive and less expensive.

srP™ and sustainability resource Planning™ are trademarks of Verisae Inc. ©2010 Verisae Inc. all rights reserved. energy-Cost-savings_Version1.0


about VeRIsaeVerisae (www.Verisae.com) develops, markets, and licenses SustainabilityResourcePlanning(SRP)™,an

enterprise solution that empowers organizations to make “sustainability actionable”. Verisae helps

measure,manageandmonetizeenergycostsandcarbonemissions.SRPcoversthecorefunctionsof

sustainability needs by combining multiple business processes and systems into one database to use

across the enterprise. Our platform improve operational efficiency, make sustainability initiatives actionable,

and reduce energy costs carbon emissions for distributed enterprises and energy companies.

ENVIRONMENTAL MANAGEMENT

Carbon Emissions Manager

• Scope1&2Emissions

• Scope3Emissions

SustainabilityProjectManager

Water Manager

Waste Manager

ENERGY MANAGEMENT

Energy Supply Manager

• UtilityBillProcessing

• ActiveEnergyResponse

• UtilityContractsManagement

• EnergySpendManager

Energy Demand Manager

• Real-TimeEnergyManagement

• ActiveEEDispatch

• EnergyEfficiencyProjects

Given the heightened priority of corporate sustainability, Verisae is positioned right now to enable

organizations to establish a carbon footprint baseline, outline energy management options, and provide a

comprehensive corporate sustainability action plans in a manner of months. All of which can be imple-

mented with metrics in place to highlight bottom-line cost savings and return on investment timelines.

Today, Verisae delivers a broad range of sustainability solutions to over 40 global clients with a service

network of 7,500 third party service providers consisting of 60,000 application users. Our integrated

sustainability platform actively tracks over 2,100,000 million assets across 20,000 sites. We help

measure, manage and monetize energy costs and carbon emissions. We are uniquely position to help

organizations prove return on investment (ROI) for sustainability initiatives.

VERISAE WORLDWIDE HEADQUARTERS100 north First street, suite 701a MAIN WEB EMAILMinneapolis, Mn 55403 usa 612 455 2300 www.verisae.com [email protected]

ASSET MANAGEMENT

Service Manager

• ServiceProviderManagement

• FinancialManagement

Asset Manager

• FacilitiesManagement

• EquipmentManagement

• AssetMonitoring&Alarming

• Parts&InventoryManagement

ProcurementManager

• Rebates&IncentivesManagement

• TotalCapitalPlanning

• EquipmentProcurement

9 Ways Verisae Energy Cost Savings Whitepaper

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