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Seven deadly sins of energy waste.

Corporations annually waste millions on energy expenses. The good news is mistakes are easy to pinpoint and change often comes down to a simple formula: Know thy utility, know thyself.

I'm going to stick my neck out by saying that businesses nationwide waste millions each year on water and power. the reason is simple: They just don't know how to work with their utilities providers. Frankly, instead of going down the drain or up in smoke, corporate dollars could be better spent.

Before a mob of angry senior executives tries to hang me by my thumbs for suggesting oversight, let me say I have no hard evidence for such a sweeping statement. But each year at the Los Angeles Department of Water and Power - the nation's largest municipally owned utility - we see corporations waste plenty. What's more, I am fairly sure the situation is not unique to Los Angeles, and that the tab is pretty big.

But good news is that change may be as simple as turning off the lights. In terms of energy consumption, there are in fact seven common mistakes that can be pinpointed and rectified. Along these lines, most utilities offer conservation and rebate programs to help you shave costs. But you won't know about these unless you ask. That's why the first principle of energy conservation is, "Know thy utility, know thyself."


Stepping back a moment, let me sketch a picture of the Los Angeles DWP and our business environment. If we were a public company, based on overall sales of $2.2 billion for fiscal 1990, we would probably rank 389th on the Forbes 500. Measure us by our $219 million in net income, and we would land somewhere around 202nd place. We have 11,000 employees serving a city population of nearly 3.5 million residents, and our home turf comprises 464 square miles. Our operations are financed solely by the sale of water and electric services, no tax support is received.

In the business community, sometimes I am absolutely amazed at the level of waste. Here's an example:

One of our major clients is a hotel in Los Angeles. Our representatives talked to management about water saving programs, but it told us their maintenance procedures were sound, and that they didn't have a problem with leaky plumbing. Later, the DWP offered rebates to businesses that installed low-flow toilets. Low-flow toilets can be bought in bulk for around $50 each, and our rebate program was around $100 per toilet. Compelled by these numbers, the hotel decided to take advantage of the program.

Ideally, putting in new, low-flow toilets should have cut water use by 20 percent. But the hotel's post-installation consumption figures plunged nearly 80 percent. Our conclusion: the older toilets were leaking like sieves, but management didn't know it.

What about your company? Can you say without hesitation your company is doing all it can in terms of conservation and savings? If so, let me give you a pat on the back. If not, know that you can begin to turn the situation around by avoiding seven mistakes. These primarily involve developing a strong working relationship with your utility. In so doing, you can save time, resources, and money.

1. Companies don't have a single contact person with their local utility, someone who understands their operations and has direct access to senior management.

If knowledge is power, communication is the key to it. Your local utility may have a major accounts program, or MAP, that might be similar to ours. For a business to qualify for our MAP it must use 150,000 kilowatts a month or more. As a point of comparison, the average home in Los Angeles uses 400 Kilowatts a month.

Too frequently, the MAP representative at DWP doesn't have just one person at a company to contact. Or, if they do, the person has been stuck with the job, is unhappy about it, and has limited access to senior management.

This job is too important to toss to someone as a last-minute assignment. Whomever you designate as utility rep should have access to someone who can sponsor changes down the line. If they don't have that authority, your MAP representative's advice will go to waste.

Your utility representative must also have the time and resources to do the job. In addition, having at least some technical training - if not an engineering back-ground - will help. We find that communication is easier if a corporate representative can talk in technical terms.

2. Companies don't meet with their utility representative often enough.

This is a spin-off from policy number one, but rates its own spotlight. Our policy at DWP is to let the customer call the shots. Some of them don't want to talk with our representatives unless they find a problem. But I can think of a better way of doing things. Even If communication between customer and representative is only five or ten minutes on the telephone each month, that time is well spent - although I encourage periodic face-to-face meetings. Your representative can help you cut through red tape, analyze rates, or make sure you are on the right rate program.

Similarly, many companies don't consult with their utility when they are considering expansion or other major modifications. this is especially true in the planning stages of a move. Many times we won't find out about a company's expansion plans until about 90 percent of the design work is done. At that point, it may be too late for them to follow our device and change course.

3. Companies track costs but don't understand their consumption rates.

The pattern usually goes like this: The utility sends out the monthly bill and someone at the company writes a check. In many cases, I'll bet, no one stops to question if the correct rates are used, or if the bill is higher than normal. (The latter condition might signify that there is a problem somewhere at the facility.)

In fact, we have found that many of our customers don't even know what rate or rates are applied to the company, even though they may be eligible for different rate structures. Particularly helpful may be structure with demand-heavy, time-planned rates.

4. companies don't know their own plant and the demands made on it.

Bottom line: Many businesses don't know their own operations. Take the example of a plant manager who thought he was conserving energy by turning off lights in the parking lot after hours. One of our rate auditors - how happened to live in the neighborhood and passed the plant on his way home from work each night - told the manager that the lights weren't being shut off. the moral: Companies need not only to set up but also to monitor operating procedures. Companies should also develop a base line of energy use, tracking what is normally consumed, and by what departments. when our representatives sit down with a major account, they ask how energy is being used. Sometimes the answers are surprising.

Another example: An engineer at one of our major accounts would test a 600-horsepower, standby air conditioner once a month during peak, daytime hours - just to make sure it ran. But whenever he tested the unit, 500-kilowatt charge showed up on his bill. Was the testing procedure necessary? If so, the engineer may have been able to test the unit when rates were lower.

5. Companies don't ask their utility rep about prospective purchases of expensive energy-management technology.

Here's the scenario: A salesman comes in and offers the latest in high-tech energy-management equipment. He tells you the equipment will save you lots of money. You decide to buy it, buy a few months later, the equipment's not working. Worse, the salesperson is nowhere to be found.

What happens after this guy's gone? Nobody is taking care of the problem. For management, the best step is to talk to the utility rep, who should be able to act as a neutral third party. In many cases, an employee awareness program about energy conservation steps can also be useful.

Something similar can happen with so-called cogeneration pitches. Nationwide, only about 30 percent of proposed cogeneration projects make sense. There are some questions to ask if you are considering such equipment. For one thing, ask about maintenance costs, utility standby and other charges, and conservation programs. You might also want to see a list of other projects in the area.

In our case at DWP, some people mistakenly believe that we are going to try and talk them out of a project. If it's a poor or marginal application, we will say so and perhaps point our alternatives. But if a proposal makes sense, we'll say that, too. In any event, from a cogeneration perspective, you must insist that a utility clearly explain its policies, rates, and other charges before you start.

An example: We had one situation where the company assumed that we would buy its power at any price. When we told the managers what we could really pay, they just about had a fit, especially since the project was already half-built. It's amazing: We'll supply energy to a company for years (of course, that entails establishing a good relationship with them). But then a salesman comes by, gets sold a bill of goods - never bothering to talk to us - and assumes we'll make a purchase.

6. Companies don't process utility bills efficiently.

Businesses, especially those with several outlets - such as supermarkets - can have a real challenge with this one. Each store gets billed separately, and at different times of the month. But someone at the corporate offices only wants to write one check. One upshot: Bills are held up, and late payment penalties start clicking in.

Here's another common problem: Companies use computers to write checks, but there's not enough room to print out all the billing information. In some cases, bills are sent to the wrong office. Then someone calls up and says they've paid the bill already - so why the late charge? Again, working with your account representative can help to clear up these things.

7. Companies don't take advantage of major customers programs offered by their utilities.

For a utility, getting customers to conserve water and power can be a relatively cheap path to additional resources. Often, conservation means not having to plan for a new generating facility for years - that's the case at DWP.

In sum, remember that increasing efficiency and forming a good working partnership with your utility isn't that tough. To be sure, it takes planning and work to get the most out of your dollar. But the payoff can be less waste and more money to plow into R&D, infrastructure, or personnel.
COPYRIGHT 1992 Chief Executive Publishing
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Copyright 1992, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Title Annotation:common mistakes in energy consumption
Author:Waters, Dan
Publication:Chief Executive (U.S.)
Date:May 1, 1992
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