Utility Deregulation and
Energy Management
George R Owens PE CEM, President
Energy and Engineering Solutions, Inc.
gowens@eesienergy.com
410-964-3513
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Energy Management Roadmap
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Utility Deregulation
Energy Management
Renewable/Future Energy Resources
New Construction
Energy Security
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Alternative Titles Considered
• “The Good, the Bad and the Ugly of Utility
Deregulation”
• “You Need to Be Careful What You Wish
For”
• “Opportunities Still Exist for Building
Owners”
• “Utility Deregulation - What’s Next?”
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Utilities – a Building’s
Second Greatest Expense
26.6% UTILITIES
19.9%REAL ESTATE
TAX
27.7% LABOR
25.9% INSURANCE,
CONTRACT
SERVICES, MISC.
Typical Master Metered Building Expenses
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Utility Deregulation
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The Utility Deregulation
Roadmap
• Deregulation Background
• State Activities – each one is different
• The Process of Taking Advantage of
Deregulation
• Risk Management
• Utility Deregulation for Landlords
• Development Issues
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Energy Management in Changing
Times – The Current Energy Crisis
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Rolling blackouts in California
PGE and Enron declares bankruptcy
Rates are up over 50% in California
Deregulated power available for less in
some states
• Texas and Ohio start in 2002
• Energy rebates and incentives are back for
existing operations and new construction
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What is Electric Deregulation
• 1&2 Generation
– Being Deregulated
• 3 Transmission
– Regulated by FERC
• 4&5 Distribution
– Regulated by State Public Service Comm.
– Responsible for getting power to the customer,
reliability, billing (may be partial) and restoring power
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Electricity State Status
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What’s Happening in California that
has Everyone Running for Cover?
• California was the first state to implement full
deregulation.
• This past few years saw:
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Wholesale power prices skyrocketed
Outages and rolling blackouts
Customer rates increasing by 50%
SoCalEd & PGE amassing over $11 billion in debt and
PGE declares bankruptcy
• California rescinds deregulation
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What went wrong in California?
• California has a shortage of generation due
to limited new sources amidst a growing
demand.
• It was a dry, hot summer.
• During that time period, many generators
were down for maintenance.
• The utilities bought most if not all on the
spot market.
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California – Can it happen here?
• The short answer is yes, however there are some
differences in the Mid Atlantic region (PJM):
– We now have a wakeup call and can try to forestall the
same thing from happening.
– The CA power exchange is operated differently than
most others, especially the PJM.
– CA has a larger shortfall of generation than this area.
– New Generation is scheduled to be built in this area
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Choosing Your Supplier
• Track Record
• Knowledge of your business, priorities and
risk tolerance
• Size
• Financial backing
• Access to cheap and reliable power
• Customer service and reporting
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What Are the Risks?
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What if the supplier goes out of business?
What if the supplier cannot get power?
What happens if you sell the property?
What is the impact of your load changing?
Schedule changes, expansions, closings, etc.
• What happens if you do nothing and prices
go up?
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Utility Deregulation - The Tough
Questions for Landlords
• What is the impact of deregulation decisions on
the Tenants?
• Is your utility lease language up-to-date?
• How do you answer?
– Why haven’t you participated?
– I can get power cheaper than you.
– Who will benefit from cheaper rates?
• How should new buildings be built for
deregulation?
– To master meter or not.
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The Ten Step Program to
Successful Utility Deregulation
• Step #1-Know Thyself
• Step #2-Keep Informed
• Step #3-Talk to Your
Utilities (all energy types)
• Step #4-Talk to Your
Future Utility(s)
• Step #5-Explore Energy
Services Now (Why Wait
for Deregulation)
• Step #6-Understand the
Risks
• Step #7-Solicit Proposals
• Step #8-Evaluate Options
• Step #9-Negotiate
Contracts
• Step #10-Sit Back and
Reap the Rewards
– See www.eesienergy.com for
the full paper
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Energy Management
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Develop an Energy Management
Program
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Always need a champion
Become educated
Pay attention to the details
Enlist resources, In-house vs. Outhouse
Develop Energy Master Plan
– Goals and Objectives
– Operating Procedures
• Measure and report results
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Energy Information –
The Starting Point
• Before starting any energy or deregulation
program:
– Understand your load profile
• Annually
• Monthly
• Daily
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Data Examples
Typical Monthly Demand
7000
6000
5000
KW
4000
3000
2000
1000
0
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Month
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Sources of Energy Information
• Internal Accounting Department
• Electric Utility
– Monthly
– Interval
• Energy Management Systems
• New Utility Metering Hardware/Software
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Energy Reduction Measures that Work:
Management Programs
• “Energy Task Force” employee awareness
program
• Preventive maintenance
• Operator Training
• Metering
• Commissioning
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Energy Reduction Measures that Work:
Lighting
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t8 lamps
Electronic ballasts
LED exit signs
Reflectors
Occupancy sensors
Daylighting control
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Energy Reduction Measures that Work:
HVAC
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Economizers
HVAC controls
start/stop
optimum start
temperature reset
night setback
HVAC unit changeouts
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Energy Reduction Measures that Work:
Controls
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Energy Management Systems
Time clocks
Direct digital controls
Demand controls
Electric deregulation monitoring and control
HVAC and lighting controls
Management information tool
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Energy Deregulation and Energy
Efficiency - A Winning Team
• Expected savings due to electric
deregulation - 10% to +5-8%
• Achievable savings due to energy efficiency
projects - 10% to over 50%
• The best results are when you do both
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Should Utility Purchasing be
Combined with Energy Services?
• First of all, you should do both
• However, unless they are separated, you
never know the value of either
• Could be by the same supplier but with
separate descriptions and prices for the two
components
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Outsourcing Vs. In-house
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When do the economics make sense
Core competencies and concerns
Consultants
Gas brokers and marketers
Energy service contracts
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Renewable/Future Energy Resources
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Electricity Generation
• By Source
• Renewables
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Hydro
Solar
Wind
Biomass
• Fuel Cells
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Distributed Generation
• Peak Shaving – Get Paid By the Utility to
Run Your Generator/Reduce Load
• Technologies
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Emergency Generators
Microturbines
Fuel Cells
Solar
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Solar Photovoltaic
• Stand alone utility connected
• Supplemental building systems
• Integrated building technologies
– roofs
• Very expensive
• Prices expected to come down
with more production
• Incentives are available
• Can be attractive if far from the
utility grid
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Wind Energy
• Large Scale Wind
Energy Projects
• Small Scale Projects
– Similar constraints as
solar
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Renewable Incentive Programs
• Financial Incentives
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Corporate Tax Credit
– Clean Energy Incentive Act
• Income Tax Credit for Green Buildings
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Personal Tax Credit
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• Clean Energy Incentive Act
• Income Tax Credit for Green Buildings
Property Tax Exemption
• Local Option Property Tax Exclusion for Renewable
Sales Tax Exemption
• Clean Energy Incentive Act - EV and Hybrid Exemption
• Clean Energy Incentive Act - Fuel Cell Exemption
• Wood Heating Fuel Exemption
• State Loan Program
• Community Energy Loan Assistance Program
• State Energy Loan Program
http://www.ies.ncsu.edu/dsire/library/includes/map2.cfm?CurrentPageID=1&State=MD
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New Construction
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Development
Taking Advantage of Deregulation
• Utilities are more interested in negotiating
to keep the new load.
• On the other hand, utilities are more
interested in laying off costs to developers
to be able to report a cheaper rate.
• Innovative rates are available from both
deregulated and regulated utilities
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Innovative Rate Options –
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Long term contracts at a discount
Economic development rates
Interruptible rates
Financial hedges against rising prices
Primary vs. Secondary
Master metered vs. Individual tenant bills
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The Development Process
Energy Management Review
• Charge the design team with developing properties
with high energy efficiency as a goal
• Use life cycle costing for determining options
• Make energy decisions early in the project
• Commission energy systems prior to opening
• Consider energy plan review
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Energy Security
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Ten Items You Can Do to Improve
Energy Security
• Recognize that Energy Security is an issue and
develop a plan
• Identify a command center and insure that critical
components have emergency power
• Identify all sources of energy and the location of
shut off devices
• Develop communications plans for customers,
tenants and employees
• Identify the source of off-site energy sources and a
list of utility contacts
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Ten Items You Can Do to Improve
Energy Security
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Identify who will be responsible for turning off energy
sources during an emergency
Maintain and routinely test any onsite emergency
generator(s).
Identify a source of temporary emergency generators in
case the power will be out for an extended amount of
time
Identify all sources of outside air and develop protection
measures
For cold weather centers, develop contingency plans for
an extended loss of heating.
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Conclusion
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Energy Management Conclusions
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Utilities are a controllable expense
Energy management pays off
Develop a program and take care of the details first
Deregulation is here, now
Understand and manage risks
Landlords have unique issues
Get involved in the process or get left behind
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The Best Energy Management
Program Will Have:
– An Energy Master Plan
– Well trained and motivated owners, staff and
contractors
– A dedication to preventive maintenance
– An energy procurement strategy
– Optimized equipment based upon life cycle
costing. I.e. Lighting, HVAC and Building
– Up-to-date, functional Controls and
Information Systems
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Internet Resources for Utility
Deregulation
• 10 Step paper - www.eesienergy.com
• State activities http://www.eia.doe.gov/cneaf/electricity/page/restructure.html
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State regulatory commissions www.naruc.org
Utilities - www.utilityconnection.com/
Maillist - AESP-NET@AESP.org
Energy Futures Pricing http://quotes.ino.com/exchanges/?e=NYMEX
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