Purchasing Energy Economically

by John Klein, Sharon Levin, and Deborah Cloutier

The following excerpts are from IREM's Key Report, A Practical Guide to Energy Management (IREM Copyright 2005):

You don't have to be an expert to buy energy and related services at the lowest cost. However, to be effective in the effort to reduce energy costs, it is important to understand the billing process. It is crucial to understand each item on the energy bills, know exactly what you are paying for, and what you are getting.

To gain greater understanding of the billing process, you can begin by contacting the provider of energy and/or energy services. If you do not already know who your utility representative is, find out. Most utility companies have representative, who is responsible for and assigned to deal with individual accounts. Depending on the size of your building or the portfolio managed, a personal meeting may be arranged. Even if the meeting can only be a conference call, allot sufficient time to ask all your questions about the bill and the rates in order to gain a thorough understanding of the pricing structure on which your utility bills are based.

We cannot stress too strongly the importance of scrutinizing your utility bill. The actual bill must be checked monthly. Many companies and organizations use third-party bill-paying services, which may only provide a synopsis of the bill to the building owner or property manager. This can lead to a chain reaction of errors. Many utilities allow only narrow time frames in which customers can pay the bill without late charges. Therefore, the act of paying the bill becomes more urgent than verifying its accuracy. Two major points to keep in mind are:

1. Utility companies make billing errors.
2. Utility meters are not always accurate.

As an example, when you buy gasoline for your automobile, you know that the actual gallons of gasoline flowing into your car equals the amount stated on the gasoline pump because most states or local municipalities have a standard of measurement to verify that fact. When buying energy, however, we know of no regulatory agency that checks utility meters to ensure accuracy. It is your responsibility to be diligent in determining the accuracy of your energy meters. We have seen instances in which electric meters miscalculate actual energy consumed by as much as 5%!

Another approach to gain a greater understanding of utility bills is to network with members of IREM, BOMA, or other real estate associations who have more experience in this area. Local chapters of industry and professional associations have monthly meetings at which you can ask to have a knowledgeable member speak on the topic or ask the utility company to provide a speaker to make a presentation about rates and other energy services. We would point out, however, that there may be little enthusiasm or even a lack of response from various utility companies. Whatever approach you take to increasing your understanding of your utility bills, be persistent, be thorough, and accept nothing less than full disclosure of the rates.

In addition to understanding exactly what you are paying for energy, be sure to inquire about and understand any other programs offered by your energy provider. These should include:

• All opportunities stemming from deregulation (in applicable markets).
• Any rebates that may be available, either now or planned for the future.
• Demand-side management (DSM) programs.

You should also inquire about the availability of power to meet your current and projected needs as well as the quality of the power (voltage and wattage delivered). Ask about the "fuel" source - how the electricity is generated (hydro, coal, oil, natural gas, nuclear power, solar, wind). While energy generated by wind, for example, may cost a little more than that generated by burning fossil fuels, seeking out energy from this renewable resource has long-term environmental benefits (e.g., less air pollution).