You’ve heard it on the news, from co-workers, friends, and family: These are unprecedented times.
Likely, your business operations are completely different now than just a few weeks ago. Whether your facilities are shuttered, manufacturing or production is curtailed, or the staff is now working from home (WFH), it is a good time to stop and evaluate aspects of your energy program. WFH is the new trendy acronym BTW.
We highlight four important “to-do’s” for energy managers to consider during this pandemic period.
What’s the Impact?
“Stay in place” orders have been enacted around the US. Many employees are working from home or have been furloughed. This is changing the energy consumption profiles of many commercial buildings and facilities.
One of the first things an energy manager should consider is “What is the impact of all of this on current consumption?” The reason this is important is, it may have implications on cost and your current contract (in deregulated areas). The best way to determine the impact is to perform an analysis of your electricity usage data by comparing usage from this period to prior years’ period performance.
Now, if you have sophisticated data trackers installed in your facility, then you may already be tracking your building’s usage and that’s a good thing. If this is not the case, however, then a good source of data will be your local utility, supplier, or consultant. You can usually request a 12-month usage report.
We are nearing the one-month mark of the beginning of these “stay in place” orders issued by local governments. This makes it the right time to perform this year-over-year analysis and the impact the local orders have had on your facility’s consumption profile.
When requesting data, ask for summary and interval data, if available. Summary data will show the facility data by month – usually from meter read to meter read. Interval data will also be on a meter read cycle basis and it will represent data in 15-minute increments. To receive interval data, your facility must be equipped with an interval data recorder (IDR) meter. This interval data will give a more granular view of the consumption and thus a better perspective into the facility’s consumption profile. Request this data following your April meter read and again following your May meter read, since it’s expected most areas of the country will still be on a lockdown order through April. Look at your most recent invoice to get a sense of when your meter read occurs — it is usually on or around the same day of every month.
Review contract documents for Material Change clauses
This is a good time to remind yourself of some of the terms of your current supplier contract. Many retail electricity agreements come with what’s known as a Material Adverse Change clause (MAC). This is different than Consumption Variance or a Bandwidth clause. With bandwidth clauses, consumption is typically measured monthly. A MAC clause usually references a significant and possibly ongoing change to consumption. The most common industry definition of a MAC is a 25% increase or decrease to contracted volumes over a consecutive two-month period. From that clause, suppliers have options to open the contract and possibly change the price. The supplier could also pass through additional costs caused by the material change on to the customer. Evaluate this clause closely. It could be written bilaterally, where both parties can come together and agree before any changes are made to the contract, or it may not be bilateral. In which case, the supplier may hold all the decision-making power.
Understanding this clause will help you understand the options the supplier has, and your organization’s options as well, regarding any changes to the agreement. It’s been our experience that suppliers are willing to work with their clients to a mutually equitable solution. Keep in mind every situation is different. The key here is communication starting with letting the supplier know what changes have occurred in daily operations since the “stay in place” order was issued for COVID19. Is everyone WFH? Have HVAC system setpoints been adjusted or shut down? Have data center operations been relocated or consolidated to another location?
After you’ve performed the analysis of your data, then you can know what percentage consumption change your facility is experiencing.
The billing processes
Given that everyone is working from home, how is your Accounts Payable department receiving invoices?
Don’t let time pass on not receiving the physical invoice to result in a delayed payment. This could lead to additional issues with your account and the supplier, including, additional fees and possible service interruption or shutoff. Commercial customers are viewed differently than residential accounts and may not receive the same consumer protections that are being enforced by state and local governments right now for residential consumers. These protections include waiving late fees and postponing service interruptions in the interim.
Most suppliers can provide an electronic version of the invoice either via download or sent to the customer’s email address. Suppliers usually provide multiple options on how to pay the invoice, either from the supplier website, by automatic draft, or other means. Work with your supplier representative to review their options and determine the best way to do that for you.
Billing information can also be used to determine how costs might be changing month-to-month and year-over-year. Especially consider the utility charges that may not be included in your contracted energy-only rate. These include transmission and distribution charges from the wires company or local utility provider. The charges are usually tariffed to the meter’s usage profile across a 12-month average, thus a couple of months of lower demand could result in changes to the tariffs applied to the usage. Although not typically a large percentage of the overall invoice, if these charges go unchecked for a period they could result in higher monthly costs.
Evaluate Forward Market Prices
With the resulting demand reduction, market prices are reaching historical lows in natural gas and as a result in electricity pricing. Organizations do not have to wait until an approaching contract expiration to review forward prices. It’s recommended that you don’t use your expiration date as a buying strategy, because it’s not a strategy at all. Regardless of how much time is remaining on your existing contract, you can get can always get a view of the forward market. That view may be limited by the start date of the term and how specific you want pricing to be. However, if you’re looking to start several years out, this perspective may not necessarily apply to you. If your contract is expiring in the next 12-36 months, it’s the perfect time to get a forward market view of pricing and then decide if it makes sense to purchase additional years.
At the time of this writing, spot prices for natural gas were hovering at $1.60/MMBtu. This combined with the price war in the oil market is certain to ripple into a slow-down in domestic production. At some point, one would expect the supply of natural gas to reduce in the near term and thus put upward pressure on electricity prices.
Your organization doesn’t have to just evaluate grid power pricing. This remains an ideal time to evaluate a renewable energy purchase as well. Many options are available to the consumer with renewable pricing at or below current grid pricing. With a long-term view, organizations can benefit financially from the longer contracts of a renewable product to hedge future, forward positions insulating them from electricity market volatility.
All-in-all we, at Energy Edge, recognize that electricity contracts may not be a priority for businesses during this pandemic period. The safety of employees and customers is at the top of everyone’s minds along with other pressing business priorities. However, long term, there are opportunities to secure future expenses at lower rates.
If your organization is having difficulty in any of the above-mentioned areas, feel free to reach out to Energy Edge. We are more than happy to discuss more these concepts with you and answer your questions. If electricity and energy management are a strain, or if you’d rather someone else do the work to track these things down allowing you to focus on bigger priorities for your business, we’re happy to talk about that too.
Contact us today to discuss how we can help your organization address these concerns at little to no cost. We can act as your organization’s representative to interface with the supplier or utility to resolve issues. We can perform a data analysis of consumption and provide forecasts along with budgets. We can help with contract review and negotiations. We can also request pricing on your organization’s behalf for future contract periods and advise on when to make those buying decisions. If it involves any aspect of your company’s energy program, we are available to assist.
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