Seeing is believing. Here are some case histories of projects and programs that Independent Energy Consultants President Mark Burns has implemented, and the natural gas savings and electricity savings that followed.
|Opt-out, single community, 60,000 pop. - Opt-out Governmental Aggregation Program
Buying Group Description:Single community seeking offers for Residential and Commercial customers.
Local Utility: Duke Energy
Challenge: Community wants to offer savings to residents and is facing a short-fall in their general fund due to declining revenue returned from the State.
- Independent Energy Consultants solicited offers for 1, 2, and 3 years from all eligible suppliers.
- Rates from the utility company were the highest in the State and have been climbing. The Price to Compare (PTC) for a shopping customer was 9.9 cents/kWh. Independent Energy Consultants understands the true market conditions and knew significant savings are available.
- Independent Energy Consultants prepared an RFP in which it asked suppliers to make bids that included civic grants to the community’s general fund based on the number of accounts enrolled.
- IEC worked with suppliers to develop accurate load profiles including attrition rates so the suppliers could submit offers that were revenue-neutral for their business. The concept is to take some of the savings and share them with the community.
- Suppliers provided bids for 1, 2 and 3 year terms, each with different rates to residents, expressing them with and without a civic grant going to the community’s general fund. Longer term agreements had larger civic grants because the supplier has more time to recoup that shared savings.
- Residents received price protection with a 3-year fixed rate. The alternative rate from Duke Energy at the time was 59.6% higher.
- In the first seven months of the program the average residential account has already saved over $400 vs. the alternative rate from Duke Energy! The collective community savings have risen to $3.9 million in that same time.
- The community received a civic grant of over $160,000 to use as they deem best.
|Opt-out, four communities, 57,000 pop. - Opt-out Governmental Aggregation Program
Buying Group Description: Four communities seeking offers for Residential and Commercial customers. Combined Population: 57,000.
Local Utility: Ohio Edison
Challenge: A limited amount of discount-price power is available on a first-come-first-served basis. Over 100 communities seek this power, but only a small fraction will receive it.
- Mr. Burns demonstrated to the Mayors and City Councils that open-market conditions would not result in significant savings for their residents.
- He explained the process for obtaining this limited supply of discounted power that was set aside to "jump start" competition. He convinced the elected officials that those who acted quickly could receive this power and be able to save their residents the most.
- He led Public Hearings to gain support for the need for timely action.
- Employed formal project management techniques that completed numerous tasks in parallel.
- Eliminated all slack time from the project schedule. Began work on the next milestone the moment the prior critical-path activity was accomplished.
- Each community received the discounted power on the first day deregulation was allowed in Ohio. They realized savings up to 50% off their generation shopping credit. That equated to over $300/year in savings for many residents.
- Many communities represented by other consultants did not act quickly enough to receive this discounted power. Residents in those communities received offers based on the prevailing market conditions. Those offers yielded savings of only 1-3 percent off generation shopping credits.
- By understanding the process, preparing the clients, informing all stakeholders of their plans, and using excellent project management techniques, we were able to make this a true success story.
- Collectively, these communities have saved their residents and small businesses over $8 million in the first three years of their programs.
|Opt-out, single community, 54,000 pop. - Opt-out Governmental Aggregation Program
Buying Group Description: Single community seeking offers for Residential and Commercial customers. Community Population: 54,000.
Local Utility: Cleveland Electric Illuminating
Challenge: The community is under severe budget constraints, but wants to move forward with an electric program to help its residents and small businesses save on their utility bills. They are also looking for creative ways to fund the restoration of a Veterans' Memorial.
- Mr. Burns wrote the Request For Proposal to require the winning supplier to make a donation for each account enrolled in the program.
- The donation was earmarked for the specific purpose of restoring the Veterans' Memorial.
- The RFP also required the winning bidder to reimburse the community for its administrative costs in establishing the program.
- The cost to the supplier was passed onto the customers through a slightly higher offer price, but significant savings were still achieved.
- The donation prevented tax dollars from being used to restore the Memorial.
- Through the creative thinking of its consultant, the Community was able to establish and administer the program at no cost, and was able to fund a much needed restoration project without using taxpayer dollars.
- The supplier was also able to gain a great deal of customer support and loyalty by being recognized for making the generous donation.
|Opt-out, single community, 32,000 pop. - Opt-Out Governmental Aggregation Program
Buying Group Description: Single community seeking offers for Residential and Commercial customers. Community Population: 32,000.
Local Utility: Dominion East Ohio
Challenge: The Community Administration is a believer in the power of aggregation programs but is reluctant to set rates for residents and wants to be shielded from potential second guessing if the volatile energy markets move against them.
- Independent Energy Consultants issued an RFP suggesting suppliers offer a variety of pricing products including fixed rates, variable rates, price caps, etc. It was also requested that suppliers consider giving residents the ability to choose between various price products.
- IEC received bids and identified the supplier with the best pricing and the ability to undertake such a complex endeavor.
- The winning bidder provided a default variable rate to all that would change each month. The price would be determined using a predetermined formula and changes on the monthly NYMEX settle price of the expiring natural gas contract.
- The offer also allowed residents to contact the supplier and convert the variable rate to a fixed rate at any time. The fixed rate would last for 12-months or until the end of the program, whichever is less.
- The fixed rate would be determined by taking 12% off the supplier’s standard service offer for the month.
- The program has proven to be a success. The community leaders have received compliments for their innovative thinking and have been shielded from criticism because the decision to choose a variable or fixed rate is now an individual choice.
- At the mid-way point of the 2-year program 11% of the program participants have selected the fixed rate option. The other 89% of residents and businesses have remained with the monthly variable rate. Both groups have fared well with the monthly variable rate often being less than $5.00/Mcf.
- The supplier has handled the complex program logistics without incident and program participation remains strong.
|Opt-in, single community, 85,000 pop. - Opt-In Governmental Aggregation Program
Buying Group Description: A single community seeking offers for Residential and Commercial customers. Community Population: 85,000.
Local Utility: Dominion East Ohio
Challenge: How to coordinate an opt-in program with an opt-out program that will start the following year without damaging the buying group's size and bargaining power.
Opt-out programs are only allowed to automatically aggregate eligible customers who have not chosen a supplier on their own. Customers joining the initial opt-in program therefore are ineligible to be automatically included in the opt-out program. They must take action to join the opt-out program.
- This scenario, while not desirable and/or recommended, came about because the regulations were not yet in place to allow for opt-out aggregation. Only Opt-in aggregation programs were allowed at the time.
- With natural gas prices high and the winter heating season approaching, the community decided it was best to begin with an opt-in program so that its residents would have a lower-cost alternative to the local utility prices.
- The Request for Proposal (RFP) was written to ensure suppliers knew that an opt-out program would follow at the end of a desired 1-year opt-in program.
- Only suppliers agreeing to bid on the subsequent opt-out program were eligible to bid on the opt-in program.
- The objective was to structure a deal, if possible, with the same supplier for both programs.
- To make this a possibility the contract with the winning bidder for the opt-in program contained a provision affording them the "right of last look" for the opt-out program.
- Open enrollment was created during the 3-week time period the opt-out notices were being sent. This allowed customers in the opt-in program to transfer to the opt-out program. Otherwise, they would be renewed as the supplier's customers and not those of the Governmental Aggregator. This would drastically reduce the size of the buying group and lessen their bargaining power with suppliers.
- Also wrote into the contract the need for an open enrollment during the 7 summer months so people who missed the earlier opportunity to transfer from the opt-in program to the opt-out program could do so.
- Press releases at key times helped get the word out and enrollment spiked.
- Held public hearings and stressed how the opt-in customers could join the opt-out program.
|Opt-out, four communities, 185,000 pop. - Opt-Out Governmental Aggregation Program
Buying Group Description: Four communities seeking offers for Residential and Commercial customers. Combined population 185,000.
Local Utility: Duke Energy
Challenge: Community leaders began natural gas programs in April 2006 with the clear objective of beating the monthly variable rate alternative from the local utility, Duke Energy.
- Independent Energy Consultants performed an analysis of the historical monthly gas cost recovery rate (retail rate) from the local utility. We then compared those retail rates to the wholesale gas rates as traded on the New York Mercantile Exchange (NYMEX) for the same months. The difference between the two rates provided insight about the mark-up or retail adder applied by the local utility to recover their costs.
- Independent Energy Consultants then solicited a variety of price products in a competitive bid which invited all eligible suppliers. The bids were reviewed and we presented our findings and a recommendation to our clients. Each community selected the same lowest and best bidder.
- Independent Energy Consultants demonstrated to our clients how the “NYMEX Plus” offer we had brokered was lower than the historical implied formula derived from knowing the utility’s Gas Cost Recovery Rate.
- Armed with this information, it was decided by our clients that Independent Energy Consultants would use the formula and set monthly variable rates when and how they deemed appropriate. Once a rate is set, IEC notifies its clients within 24 hours.
- Independent Energy Consultants developed a gas hedging model, watched the market trends, and continues to buy some or all of given month’s gas on market dips.
- As of March 2011, 190 pricing decisions have been made by Independent Energy Consultants. In that time we have set rates lower than Duke Energy in 154 of those months or an impressive 81 percent of the time.
- In this time, our client’s rates have been as low as $4.26/Mcf and often the lowest of any aggregation program in the state of Ohio. Participation in the program remains strong.
|Opt-out, single community, 85,000 pop. - Opt-Out Governmental Aggregation Program
Buying Group Description: Single community seeking offers for Residential and Commercial customers. Community Population: 85,000.
Local Utility: Dominion East Ohio
Challenge: Community leaders need to decide when to lock-in a fixed price for the upcoming 6 months of the winter heating season.
It is late August and community leaders have until September 10th to "strike" their winter price based on the prevailing NYMEX natural gas futures market. A number of factors could and will influence the NYMEX prices during that time. Officials are not sure how the market will move, what will cause it to move and when is a good time to strike the winter price.
- Frequent communication and timely action are needed to make wise decisions here.
- Mr. Burns has briefed them on the factors that are likely to drive the market. Those factors include, but are not limited to: near-term weather reports, hurricane activity in the Gulf of Mexico, natural gas storage reports, crude oil price volatility driven by unrest in the Middle East, nuclear power plant planned and unplanned outages, and technical analysis of natural gas price charts.
- By trending market price volatility, the consultant is able to calculate how much the price could go up over a given period of time. This "Value at Risk" (VAR) was used to help quantify short-term risk/reward potential.
- By knowing the volume of natural gas that will be consumed during the winter months along with the price volatility of the futures market, the consultant is able to derive a VAR of $2.4 million over the next 12 days at a 95% confidence interval. This information allows the Mayors to know the limits of how much their residents stand to gain or lose on a collective basis during that time period.
- (i) A favorable storage report came out on Thursday morning at 10:30 E.T., (ii) the client was immediately notified, (iii) prices declined as expected, (iv) client instructs the consultant to strike the winter price, (v) supplier purchases the gas on the NYMEX futures market, and (vi) the residents receive a very attractive price for the winter heating season.
|Opt-out, single community, 22,000 pop. - Opt-Out Governmental Aggregation Program
Buying Group Description: A single community seeking offers for Residential and Commercial customers. Community Population: 22,000.
Local Utility: Dominion East Ohio
Challenge: Identifying eligible customers within the physical municipal boundaries of a community possessing 5 different mailing city descriptions.
The community in question was formed in 1991 by combining small-unincorporated areas into a Village and ultimately became a City the following year. However, throughout this complex transition they retained 5 unique postal city addresses. When purchasing the community customer list from the local utility they are not able to isolate on municipal boundaries. They provide customer data based on eligible zip codes. In this case, the customer list contained thousands of accounts that were not within the physical municipal boundaries. These accounts had to be identified and removed to prevent inadvertent customer switching.
- The founder of Independent Energy Consultants, Inc. (IEC) had previous experience developing an opt-out electric program with this community. That experience made it easier to identify boundaries and eligible customers. This is a benefit of using a consultant like IEC who can administer both electric and natural gas aggregation programs.
- Numerous resources were used to develop an accurate list of customers. Those included, but were not limited to: Engineering databases of street addresses; County Geographical Information Services (GIS) parcel mapping; 911 street address listings; detailed community maps; Global Positioning Systems (GPS) software tools; and USPS Zip code reports.
- Opt-Out Notices were designed with a prominent warning disclaimer for customers to contact the supplier if the notice was received by someone outside the municipal boundaries.
- A visual verification was performed on questionable addresses.
- By using a combination of sophisticated software tools, list matching techniques, and a great deal of manual labor, we were able to produce a very accurate list of eligible customers. There were no instances of inadvertent customer switching.
- The City also received an auxiliary benefit from the consultant's work in that it was able to update some of its tax records.
|Opt-out, single community, 34,000 pop. - Opt-Out Governmental Aggregation Program
Buying Group Description: A single community seeking offers for Residential and Commercial customers. Community Population: 34,000.
Local Utility: Dominion East Ohio
Challenge: Minimize customer confusion while meeting state and utility notification rules during a change in Suppliers for an opt-out Aggregation Program.
Whenever a customer changes suppliers on his/her own, the previous supplier, the local utility and the new supplier all send computer-generated forms to the customer documenting that request and tracking the progress in migrating to the new supplier. However, when a customer is changing suppliers because his/her Governmental Aggregation program has changed suppliers, opt-out notices are the normal and desired means of communication with the customer.
- Brought the issue to the attention of the new and former suppliers along with that of the local utility and state regulator.
- Facilitated a process whereby all parties agreed that the rules did not fit this situation and if literally applied would defeat the purpose of the rules.
- The local utility developed computer system workarounds to prevent certain notices from going out. They also eliminated the need for any action on the part of the former supplier. They were able to recode the buying group customer's accounts as being served by the new supplier.
- The new supplier sent opt-out notices to all eligible customers informing them of the new program's price and terms and conditions.
- The local utility sent confirmation letters to all customers who remained in the buying group served by the new supplier.
- The new supplier began service and sent welcome letters to the participating customers.
- This process initiated and facilitated by Mark Burns eliminated the need for "drop notices" being sent by the prior supplier. Had they been sent, customers would have thought they were being dropped from the community's program when all that was actually happening was a change in suppliers. This prevented a great deal of confusion that would have led to numerous calls to city hall.
- Press releases were created and properly timed to get the word out during this period of possible confusion.
|Corporate Electric Aggregation Program - Aggregation of Corporate Electric Accounts
Client Description: Large cable and internet provider with hundreds of facilities in major U.S. markets.
Local Utilities: Numerous utility companies involved
Challenge: Work with the corporate Purchasing Manager and vaious Facility Managers who make decentralized purchasing decisions to identify and capitalize on opportunities to source lower cost electric supply in deregulated markets.
- Worked on behalf of the corporation to identify opportunities and brokered new electric supply agreements in deregulated markets. 64 facilities were identified as excellent candidates for supplier switching and have saved as a result of our efforts.
- Used Reverse Auctions and a Post and Respond Bulletin Board to find the best supplier offers while market conditions were at 5-7 year lows.
- Brokered electric supply contracts that will save the client over $250,000 in the next twelve months.
- Continue to work with the Purchasing Department to broker additional contracts before current supply agreements expire.
- Preparing to offer ongoing energy accounting and utility bill auditing services using our licensed EnergyCAP software.
|1100 Unit Apartment Complex
Client Description: Apartment complex with 1100 units in 122 buildings served by 55 natural gas accounts.
Local Utility: Columbia Gas of Ohio & Columbus Southern
Challenge: A severe ice storm knocks out power for several days. Boilers deenergize and pipes freeze and burst. In this turmoil the property manager was rightfully addressing immediate needs and did not recall the language in his natural gas contract.
- Upon learning of the major ice storm, Independent Energy Consultants contacted its client and inquired about their electric status, knowing that electricity was needed for their gas-fired boilers to operate.
- We were informed that power had been out for a prolonged period and the apartments were using portable space heaters.
- Independent Energy Consultants then went to our contract database and discovered provisions that required our client to pay a penalty and notify the supplier if they expected to use less than 90 percent of their contracted quantity.
- Shortly thereafter we were informed by our client that the subzero temperatures had caused many of the boilers' piping to freeze and crack rendering them permanently inoperable.
- Independent Energy Consultants was able to verify that 18 of the 55 natural gas accounts were not consuming gas because they were associated with the damaged boilers.
- IEC contacted the supplier and informed them of the situation, mentioned the Force Majeure clause of the contract covering "Acts of God" and recommended the supplier reduce the contract quantities by the respective amounts.
- Due to prompt action by Independent Energy Consultants, our client was able to avoid paying penalties and the supplier was able to quickly readjust their scheduled gas supplies.
- Finally, IEC assisted the client in analyzing the cost effectiveness of various boiler repair and replacement options. The analysis included capital costs, maintenance costs, and fuel cost forecasts for both electric and natural gas options.
|Industrial Laundry Facility
Client Description: Industrial laundry facility that receives, launders, irons, folds, and returns laundry to health care providers throughout the Midwest.
Location: Northern Ohio
Challenge: The facility’s energy performance is being benchmarked against other facilities and they are striving to improve their ranking.
- Independent Energy Consultants conducted a 1-day site walk through to assess the energy usages in the plant and to provide conservation measures that would help the plant become more energy efficient, more productive (higher throughput rates), or both.
- Discussions with management led us to realize there were real differences in the laundry type, size, weight and required processing steps (e.g., does the piece require ironing, hand folding, etc.) that would necessarily impact the amount of energy and time required to process a pre-defined lot of laundry. Senior Management was cautioned to factor this in when comparing these two Key Performance Indicators for dozens of facilities.
- Recommendations included:
- Lowering air compressor setpoint on the compressor used to blowdown and clean equipment. The reduced pressure used to meet OSHA safety standards was being accomplished with a pressure reducing nozzle.
- Replacing T-12 fluorescent bulbs and magnetic ballasts with T-8 bulbs and electronic ballasts.
- Rerouting air compressor suction ductwork to draw in cooler air.
- Repairing compressed air leaks.
- Optimizing steam pressure and quality to reduce cleaning and drying time for laundry.
- Switching service to a lower cost electric supplier.
- Nine recommendations were made and six provided paybacks of less than two years. Two were recommended for further study and one was suggested as an infrastructure project.
- If all recommendations were implemented, including those that required further cost/benefit analysis, a 32% reduction in electric consumption and 30% reduction in natural gas could be achieved.
- Client was informed of various Federal, State and local utility grants, loans or rebates that would help defray some of the cost of implementing some of the Energy Conservation Measures.
|Large Family-Owned Ranch
Client Description: A large family-owned ranch grows crops in a remote arid region of the western U.S. In order to grow their crops they must constantly irrigate from a nearby river during the months of March through October.
Challenge: Due to its remote location, the local electric utility does not provide service at this time. Independent Energy Consultants was asked to determine whether there would be a more economical and reliable alternative for irrigation than using the current diesel generator (DG) sets. DG sets are diesel engines that drive a generator to produce electricity. The generator is then used to power electric motors that run their irrigation pumps.
- Many solutions were considered, including an array of other distributed generation options, alternate fuel sources, and staying with the current system.
- The decision was finally narrowed down to 2 choices. Stay with the DGs or build a substation and line extension and take electric service from the local utility.
- If an electric line extension were to be made, the irrigation pumps would be powered from the utility and the DG sets would be used as emergency backup (if an interruptible rate were selected) or sold for salvage value.
- The ranch owner obtained all necessary siting permits and a preliminary cost estimate for building the 16-mile line extension.
- Since the rancher was the only customer requesting the line extension, he would pay the entire cost over a 15-year period. Our review of the utility tariff showed that any new customers tying into the extension in the first five years would share in the capital cost. None were known at the time and our conservative analysis assumed that none would be available to help defray the cost.
- Independent Energy Consultants analyzed the rancher's electric consumption (energy, demand, power factor, load factor, time of use, power quality, etc.) and the local utility's rate structure.
- The would be electric operating costs were then compared to the fuel and maintenance costs of running the DGs. The analysis also considered the efficiency and reliability of the two options.
- The optimal rate schedule from the local utility was identified and it was determined that a 7-year project payback was needed. In other words, in 7 years the electric bills paid to the utility would be sufficiently lower than the DG fuel and maintenance costs to overcome the capital cost of building the line extension.
- The family-owned ranch is expected to operate for many years to come, and the electric line extension project is likely to move forward.
- Finally, the utility company offers incentives to help finance solar panel projects in this area of the country. Independent Energy Consultants was asked to analyze the cost of that option in conjunction with the line extension. Our analysis showed that even with discounts on solar panels, there were many other lower-cost alternatives for self-generation of electricity.
|Commercial Warehouse Lighting Retrofit
Client Description: A 100,000-square-foot warehouse where steel coils are cut to size, stored and ultimately shipped by truck.
Local Utility: Cleveland Electric Illuminating
Challenge: Plant Manager wants to save money on his electric bills and has asked Independent Energy Consultants to provide an assessment of his lighting. He believes in providing a well-lit environment even if it means exceeding the acceptable industry standards. There is a strong desire to project a positive image on existing and potential clients and to provide a pleasant work environment for employees.
- An onsite inspection of the warehouse found that it is currently lit by 150 1000-Watt Metal Halide (MH) high-bay lamps.
- The office spaces are using energy efficient T-8 fluorescent bulbs with electronic ballasts and light levels are acceptable.
- Illumination readings were taken at representative sample points across the warehouse, including points thought to be the darkest. The average illumination level was 46.2 foot-candles. Industry standards ASHRAE 90.1 and IESNA recommend 15 or more foot-candles for the "Medium/Bulky Material Warehouse" category of structures.
- The warehouse staffing levels and times were identified and found not to lend themselves to installing occupancy and/or photo sensors.
- Overhead crane travel prevented lowering the lighting, which would allow for delamping some of the existing fixtures.
- A 1-for-1 replacement of the metal halide lamps with 6-lamp T5 HO full spectrum fluorescent lamp fixtures with mirrored parabolic reflectors was recommended. This would produce an estimated 39 foot-candles with a more uniform dispersion pattern. This is well above code recommendation of 15 foot-candles, will have a brighter appearance, and a higher Color Rendering Index.
- The fluorescent fixtures use programmable electronic ballasts for efficiency, immediate start and rapid restart capabilities.
- The tax benefits contained in the Energy Policy Act of 2005 were explained and quantified.
- A maintenance program was suggested that would lower the cost of replacing burnt out lamps.
- Independent Energy Consultants also verified that there were no lower-cost electric suppliers in the area; and that this client was being served under the optimal utility rate schedule.
- A financial analysis that compared the capital cost, installation cost, utility bill savings, and ongoing maintenance cost was performed. The results showed an annual savings of $47,700 with a payback period of 10.3 months.
|Transportation Sector Company
Client Description: Commercial Electric and Natural Gas user with over 90 facilities across Northern Ohio.
Local Utilities: CEI, Ohio Edison, Toledo Edison, Columbia Gas of Ohio and Dominion East Ohio.
Challenge: Client has changed electric and natural gas suppliers to save money and wants to verify the accuracy of its new bills.
- Independent Energy Consultants uses its energy accounting and bill auditing software to monitor client’s usage and billing.
- Software models client’s organization and can run up to 50 different audits on each utility or supplier invoice.
- Audits revealed numerous errors in billing by the new contracted suppliers.
- Accounts not properly enrolled at start of a new contract,
- Accounts charged the wrong rate at the start of a new contract,
- Accounts charged the wrong rate in the middle of a contract,
- Accounts inadvertently switched back to the local utility's supply service,
- Accounts charged tax when not applicable, and
- Accounts double-billed receiving bills for the supply portion from both the supplier and local utility company.
- Independent Energy Consultants alerts client of discrepancies and assists in resolving issues and obtaining refunds from supplier.
- Refunds and avoided costs totaled over $100,000.
- In the instance of the double-billing, our audits alerted us in time to stop client from paying the erroneous second bills.
- Client has 24/7 web access to our powerful software allowing it to benchmark performance, budget, forecast, track GHG, etc.