ENERGY PROCUREMENT CASE STUDIES
Co-Op Fusion | Private Aggregation | Hotel & Water Park Resort | Property Management Seeks Relief from High Costs | Community & Their Ball Park | Bill Audit Covers Mistakes | Village Utility Tariff Troubles | Demand Response Turns Hotel into Income Generator | Utility Audit Helps City Recover Money | Homeowner’s Electric Doubles Overnight | California Office Campus Wins Electric Lottery | Condo Uses Facility to Generate Additional Revenue
Co-Op Fusion
Request
The Park District is involved in a ‘utility purchasing co-op’ that has been administered by the same corporation since 1987; and the 109 governmental and non-profit members of said co-op are bound by utility contracts that are made on their behalf. Multi-year forward contracts are priced and executed for both gas and electric with only one supplier. Our operations experts was enlisted to determine if the Park District should remain part of the co-op or break off and handle the utility purchasing on its own.
Solution
The first step is to review all the accounts. Step two, using a traditional RFP process, and price out the 14 gas accounts that make up the Park District. It is found that only three accounts are being served by a competitive supplier through the utility purchasing co-op; and the supplier servicing the co-op cannot service the smaller accounts. The other 11 accounts remain with the utility.
Rate and tariff are analyzed to determine the optimal rate for all the accounts. The three accounts, currently with a competitive supplier, are transporting on a telemetered rate which is confirmed as best. The other 11 accounts are to be transferred to alternative suppliers and broken into two different rate classes based on their usage. Savings to the Park District is $4,651 per year; money saved by placing the 11 accounts with competitive suppliers instead of the utility.
Added Benefit
As a result, electric accounts also transferred service and the annualized savings were $51,595.58 based on aggregated pricing, compared to the pricing secured through the purchasing co-op
Private Aggregation
Request
An all-electric building in Illinois, that previously received preferred, subsidized pricing from the utility. They reached out to our operations experts to help with combating the “one size fits all solution” presented by traditional municipal aggregation programs in the area.
Solution
To help provide this lower pricing, operations experts set up a private aggregation program. The “residential electric space heat” tariff started in Illinois as a subsidized rate to encourage people to use more electricity and thereby increase demand. Builders liked it because it was cost effective, and that’s how northern Illinois ended up with many all-electric homes or condos. An “all-electric” account’s usage pattern is much different than a traditional electric account. Instead of the typical bell curve for usage, with higher patterns in the summer (for air-conditioning), an all-electric or “space heat” account maintains high usage in both the summer and winter. Government/Municipal Energy Aggregation programs, like that of the City of Chicago, do not consider the different rate classes as part of their program. When the City solicits for bids, they aggregate all residential and small business rates together to get one price. All-electric accounts use more energy than typical accounts and their load profile makes them more attractive to suppliers.
Pricing as a whole for Chicago residents is very competitive as a result of combining all of the rate classes together. Standard residential customers end up receiving very good pricing, pricing they wouldn’t have been able to achieve on their own. However, residents in all-electric buildings end up paying more under the Chicago aggregation program than if they would have combined just their loads together. This is because accounts being served under the “residential electric space heat” classification no longer experience preferential treatment in the form of subsidized pricing from ComEd. They can, however, still take advantage of lower than average pricing from alternative suppliers.
Our operation experts set up a private aggregation program. These programs rely on the same underlying theory as municipal aggregation programs to produce savings; increase buying power to become more attractive to alternative suppliers; but private aggregation programs do this with much more discretion than municipal aggregation programs. Private aggregation programs target specific types of customers, such as those that use electric space heat, and affirmatively aggregate just those specific accounts together. Though this discretion means that private aggregation programs will have far fewer participants than the catch-all municipal aggregation programs, suppliers are willing to offer more competitive rates for the assurance that they only have to serve the kinds of accounts that they truly want to serve.
48 buildings were successfully aggregated, with a total of 12,200 residences for a savings of 17% below the City of Chicago Aggregation rate.
Large Hotel / Water Park Resort
Request
A Hotel and Water Park Resort in Ohio is using about 7,150,000 kWh a year in electricity which is costing them about $578,364 per year for the commodity only. With a new Public Utilities Commission change coming to their area, allowing customers to move to alternate supply for their electric service, the Property Management Group decides to explore other options. Though, they are contracted with a consulting group who is charging them a large monthly fee for their services, they are not advising them of new opportunities.
Solution
The first step; our operation experts bid this out to suppliers and perform an analysis/review. The savings potential is exceptional and the client signs an agreement with the recommended provider, ultimately saving them $160,232 per year (27.7%) on their electric costs.
Added Benefit
Our operation experts provide this property with a lower natural gas commodity price, as well, bidding out to multiple vendors. Their annual volume is 325,000 therms which cost $187,558 for the commodity only. A proposal/recommendation is submitted for review and the client contracts with a provider who saves them $105,885 (56.5%) per year. The Property’s current consulting group is released from their national contract and has been working with our operations experts for 5+ years now, as this property’s Energy Procurement and Consultant Group.
Property Management Seeks Relief From High Costs
Request
The manager of a 16 unit property in Chicago seeks electric options for her residents as their current electric contracts come to an end. Unaware of her choices, she assumes the $0.055 price from the City of Chicago is the best option. They contact our operations team to help confirm recommendations.
Solution
Gather a small sampling of invoices from this property to submit to providers for pricing. Due to multiple factors including usage patterns, load profiles, and volumes of this specific property; helping to secure pricing for a 36 month term at a rate of $0.0499 / kWh; significantly less than other providers, ComEd, or the City of Chicago.
Added Benefit
A resident who consumes over 240,000 kWh annually sees a savings of $0.0139 / kWh or $3,336 annually against their current rate, and $0.0051 / kWh or $1,224 annually against the City of Chicago offer.
Community And Their Ball Park
Request
A Village, who added a new ball-park to its facilities just three months ago, looks for a way to contract with an alternative supplier for natural gas. Due to the lack of usage history on this account, however, the village is afraid of getting penalized if actual usage is different from estimated. They turn to our operation experts for a solution.
Solution
Request for a 100% swing product as part of the request for quote process. Swing, bandwidth, or tolerance is the percent of energy that can be used above or below contracted quantities while still being billed at the contracted rate. This percentage ranges from 0% to 100%; 0% meaning that no variance is allowed and 100% meaning unlimited variance. Swing addresses small changes to contracted usage on a monthly basis, whereas material change addresses significant changes that could impact usage over the long term. The Village chooses to contract with a supplier offering 100% swing at competitive rates.
Added Benefit
The ball park’s estimated (contracted) usage for August was 5,000 therms. The actual usage was 15 therms – and they paid $6.20. On a 0% swing product when volumes are contracted and not used (as in this case), the leftover volumes get cashed-out on the open market, at whatever the going rate is. If this account had been on a 0% swing product, they would have paid around $318.60 or $21.24 / therm; a savings of $312.40 for just this one account.
Bill Audit Uncovers Mistakes
Request
When a Chicago condominium, not even six months into the year, finds themselves $50,000.00 over budget and debating cancelling some of their proposed 2013 projects, our operations experts are contacted to investigate the source of overages.
Solution
Gather six months of bills, requests updated usage from the utility, reviews current supply contracts – and goes to work.
It is determined that the property is experiencing its greatest consumption year in history. Budgeted numbers were based off historical values. This change in consumption alone resulted in a discrepancy of $17,312.96 between budgeted and actual.
During the review of current supplier agreements, it is noted that a new 100% fixed contract that was supposed to start in February was not being invoiced accurately. The property was being invoiced at a market based rate – much higher than what was contracted. This is addressed with the supplier on the property’s behalf, which subsequently triggers a re-bill and a credit of $10,977.83 to the account.
Between the usage variance, supplier mistake, and unaccounted for utility charges that weren’t budgeted for, the $50,000.00 overage is completely accounted for. The property can now take the appropriate steps towards reducing their consumption back to historic levels and get their budget back under control.
Added Benefit
Attend an on-site workshop, providing an in-person explanation of the situation and source of overages to the Board of Directors.
Village Utility Tariff Troubles
Request
The Villages’ municipal gas accounts range in size from 500 therms to 186,000 therms annually, because of this, the utility provides the option of selecting from three different rates/tariffs/riders. The utility then assigns a default rate for service that may or may not be the optimal rate for that account. Hoping to achieve greater savings, the Village contacts our operations experts to assist in better positioning their accounts.
Solution
Step one; Provide a free analysis of each of the Village accounts on an individual basis to determine the best rates for service provided by the utility, because these analyses are based on utility tariffs, which change yearly or even monthly, they must be continuously updated and re-evaluated. Through this analysis, determine the Village needs to switch tariffs for the majority of their accounts or they will be overpaying by more than $13,000 annually. Though their current supplier offers what appears to be the most competitive pricing, they cannot service their accounts under the proposed new rates. Draft RFP for a new supply contract which is then sent out to seven different suppliers, with a request for three different products and three different terms to be priced. Incorporate several pricing requirements/questions into the RFP that can affect pricing and billing. For the Village, there are multiple factors to consider before making the transition to a new supplier. Assist in detailing the pros and cons for each solution. Presented with all options, the Village is able to make an informed, educated decision. Work with the supplier’s on the Village’s behalf to seamlessly transition the accounts to their new rates.
Added Benefit
With the majority of accounts assessed to be better suited under a “choice” rate with the utility, billing is consolidated, thus reducing the work load; limiting the number of monthly invoices needing to be processed and paid.
Demand Response Turns Hotel Into Income Generator
Request
A 400-room Hotel in the PJM territory has a central Building Management System (BMS); tied into guest room controls and the central HVAC for the common areas (meeting and convention rooms). Concerned about guest satisfaction, the Hotel approaches our operation experts, looking for guidance on how to utilize this system in order to participate in their utility’s demand response program, while minimizing the impact on their guests.
Solution
Contrary to popular belief, hotels can be ideal candidates for demand response; they aren’t always at full occupancy and a newer BMS will allow central management of each individual room’s occupancy status and control over their HVAC. Given that, complete a simple site assessment which includes gathering information about equipment, variable frequency drives (VFD), and back-up generation. Findings conclude that the Hotel is capable of achieving a load curtailment or demand reduction of 400kW.
Work with the client to put together a load reduction strategy, should an event be called. This strategy includes precooling and changing set-point temperatures on their chiller, reducing the number of elevators running for up to 3 hours, and reducing the speed of their VFDs in the fans and pumps. VFDs provide great savings opportunities since a 10% reduction in speed saves 27% in energy.
Based on the plan year capacity payment value for their utility ($45.80/kW for 2014 and $54.75/kW for 2015), the Hotel earns an additional income of $14,654.90 and $17,520.00 respectively (capacity value X 400 kW X 80%). Demand response participation payment rates vary by curtailment service provider (CSP), opportunity size and utility, and range between 50 and 80 percent.
Added Benefit
Utilities view demand response (which is only needed for several hours each year) as a cost effective, environmentally friendly alternative to adding additional generation (which is very expensive and unnecessary). They view the 400 kW load reduction from the hotel as being the same as turning on 400 kW of new generation.
Demand response programs pay buildings to reduce their energy consumption or demand if the electric grid is under duress. By agreeing to curtail load if called upon, a building is paid a fee whether or not they actually do. If no event is called, the building is paid based on the load they can curtail during a 1 hour ‘performance’ test. If an event is called and the building performs, they earn an additional payment based on actual performance during the event. Assuming six hours of actual events, this hotel could earn as much as $1,920.00 in additional yearly income.
Utility Audits Helps City Recover Money
Request
After spending five years on contract with the same provider, a City decides to make the switch to a new provider that is better suited to serve their municipal accounts. Unfamiliar with this new provider’s billing system and short on time and staff, the City asks our operations experts to keep an eye on the billing for any inaccuracies.
Solution
Obtain authorization from the client to receive copies of monthly invoices from the provider. Each month, review the invoices to guarantee contract compliance and to make sure the City is being billed at the correct rate. In addition, compare utility invoices against provider invoices to avoid redundancy in billing. Over a six month span of monthly invoice review, they uncover $685.04 in billing errors related to incorrect rates, wrong units of measurement and simple math errors.
Added Benefit
Also discovered $1,995.83 in erroneous charges related to improper application of taxes. In the process of alerting the provider, an error in their billing system was corrected; positively affecting many other customers.
Homeowner's Electric Doubles Overnight
Request
A Chicago resident who signed with an alternative supplier through a private aggregation program, receives his January electric bill, and finds that it is more than twice what he is used to paying. This resident jumps to the conclusion that his rate has increased, or that the plan he signed up for is no longer a good deal.
Solution
With the resident’s account information, retrieve usage information from the utility. Upon review, the root of the problem is the resident consumed 2,400 kWh in January 2013, compared to over 6,000 kWh in January 2014. Explaining to the resident, due to the polar vortex and sub-zero temperatures, residents that use electric to heat during the winter, or any other fuel source for that matter, are going to experience major increases in their electric bills, regardless of what savings programs they may be on.
Added Benefit
When comparing this resident’s current rate against other available plan options, the savings would be $42.48 against the City of Chicago aggregation plan or $69.24 against the ComEd rate in just January 2014 alone.
California Office Campus Wins Electric Lottery
Request
A three-building office campus in southern California reaches out to our operations experts for assistance in joining the direct access program.
Electric deregulation (retail choice) is active in 13 states including the District of Columbia. California initially started down the path of full access (complete electric deregulation) for all customer rate classes, but after periods of energy choice in the late 1990s and early 2000s, the model is now strictly limited. A combination of:
1.) electric generator’s manipulation of the wholesale market and;
2.) the method that regulators used to set up the deregulated market eventually forced a financial collapse of the utilities.
The California legislature suspended electric choice, or direct access, in 2001 after the state suffered an energy crisis. Customers that did get on to 3rd party supplier contracts were allowed to not only complete their energy supply contracts, but remain on direct access as long as they continued to remain on 3rd party supply. Direct access under the current rules created and enforced by the California Public Utilities Commission (CA PUC) and the California Division of Ratepayer Advocates remains limited, whereby very few customers have the opportunity to use a third party supplier.
Solution
Enrollment into this program is allowed by the CA PUC exclusively through a lottery system. Customers enter the lottery via a ‘wait list’ in early June for alternative supply to begin the following January. Customers on the wait list are allowed to enter the direct access program by ‘winning the lottery’ through either: 1.) the PUC releasing additional capacity, or;
2.) other customers dropping off the program.
Help the office campus apply for direct access in June 2014 for alternative supply options starting in 2015. They were placed on a wait list and were accepted (won) because of recently opened capacity in Mid-February.
Negotiate for a competitively-priced alternative supply contract that will save the office campus 26.6% or $102,916 dollars this year based on typical historical consumption of 2,250,000 kWh.
Added Benefit
As long as the office campus remains with a 3rd party supplier on direct access, they will have continued savings against the local utility. With only a small fraction of commercial customers able to capitalize on direct access, many retail choice advocates are petitioning the California Public Utilities Commission to either lift the cap to allow more businesses to participate, or simply open up the market to everyone. Pending any changes, getting on to Direct Access is like winning the lottery.
Condo Uses Facility To Generate Additional Revenue
Request
A Chicago condo a current client of our operations experts, reaches out looking for additional opportunities to save money. The condo is feeling the impact of rising energy prices and looks to their consultants for advice.
Solution
Review the condo’s historical usage and demand. This condo uses around 2 million kWh annually, with a capacity peak load contribution of 700 kW. Identify an opportunity for possible participation in a demand response program and follows-up with questions about the facility, equipment and operations. Demand response programs pay buildings to reduce their energy consumption or demand if the electric grid is under duress. By agreeing to curtail load if needed, a building is paid a fee, whether actually called upon to participate or not.
Work with the condo to put together a reduction strategy tailored to their facility. Through a combination of precooling building and chilled water temperatures, turning off any refrigeration compressors, shutting blinds in South and West facing rooms, turning off lights and removing a bank of elevators from operation, the condo is able to commit to a reduction of 150 kW if an event is called.
150 kW is only 20% of the condo’s peak load. Should an event be called, the condo can engage in these small measures to lessen their demand on the grid, without the tenants taking notice. For this commitment, the condo is sent a check for $3,434.74, even though no events are called.
Added Benefit
The Condo also opts to participate in a capacity management service, utilizing the demand response strategies already in place. By reducing their capacity peak load contribution, the condo saves an additional $3,448.95 yearly on their electric bill.
Also work with the condo to ensure the proper supply contract placement, product and term to take advantage of all the savings and revenue generated by the addition of these services.