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Today's Facility Manager

Utility Audit Services
Ongoing utility auditing can save thousands of dollars in your facility budget

Though utilities such as gas, electricity, water, and telecommunications are a large part of any facility budget, they are also among the most overlooked areas when it comes to evaluating the bottom line. In fact, Craig Phalmann, vice president of marketing and sales with National Utility Service (NUS), a utility rate analysis firm located in Park Ridge, NJ, says in the manufacturing industry, utilities and telecommunications are always among the lop five operating expenses.

With utilities comprising such a major portion of the budget, it seems they would warrant intense scrutiny. However, many firms too easily let this task fall to the way-side. Why does this happen? It could be for several reasons. For one, evaluating rates and comparing bills is no simple task; in the day-to-today world of facility management, there is rarely the time to devote to such a project.

The deregulation of many utilities further complicates matters. No longer is shopping for a utility provider as simple as comparing the rates and services of three different vendors. There are literally hundreds of choices in some cases. As a result, while deregulation has given businesses greater choices and the potential for lower rates, it has also led to a greater chance of frustration and confusion.

Secondly, there is no agency, employee group, or management interest breathing down an fm's neck to ensure the facility is taking advantage of the most cost-efficient plans. Without the fear of an inspection and possible fines, it's too easy to address many areas here an inspector truly may show up. And while one of management's demands may be to cut costs, they may care less about how or where it is done as long as it's somehow achieved.

Though cost savings can be significant, auditing a facility's utility expenses is akin to making an appointment with the doctor for a checkup-it's something you know you should do, but it's too easily ignored. But by undergoing a utility audit, savings up to as much as 25% can be realized, according to statistics from Buffalo Grove, IL. based Landis & Gyr.

For instance, Preferred Energy Services Inc. (PES), a San lose, CA-based utility auditing firm, has been working with the Comptroller's Office of The State of Texas to identify refunds and cost reduction opportunities of its electric, natural gas, water, and waste water accounts. PES has found that the method being used by its water provider to assess waste water usage did not take several important factors into account. As a result, the requested refund adjustment is over $1,000,000. The refund adjustment is being pursued through friendly negotiations.

Despite cost savings like the one described above, many firms still view an audit as too time consuming. "It's a bother, they see it as more trouble than it's worth," comments Paula Sandige, senior analyst at PES. Additionally, "it's complicated; there's a lot to know," she says.

"A lot of people think they can do it on their own," comments Phalmann. This is because many people are familiar with basic cost savings-like tax exceptions and time-of-use options. "Most users today are aware of those," he says. But as for discovering savings in more complex issues, Phalmann feels furs must meet four requirements:

  1. People to track bills each month;
  2. Time dedicated to auditing;
  3. Comparative data; and
  4. Expertise

"If you don't have these four, then you really don't have risk contained," he comments.

For instance, just the lack of one component, like comparative data, can be the element that keeps your company from discovering a crucial error in billing. Phalmann tells the story of a convenience store whose electric bills appeared to be in order. It was only when bills were compared to other stores of its kind that the store was discovered to be paying nearly 400 times what it should. The reason for this costly mistake: a meter was placed too high for the meter reader to view, so costs were estimated-obviously incorrectly.


Because few facilities can truly deliver on all four points required to conduct a comprehensive utility audit, many firms searching for ways to tap into savings might consider hiring an outside consultant to conduct the audit. But what should Fins expect of the audit?

Landis & Gyr Powers' process incorporates the following steps:

  • Needs assessment for facilities management, utility conservation, and indoor environment considerations.
  • Analysis of facility and building system conditions which includes a review of utility expenses experienced within a one to two year time frame.
  • An energy and operational audit with solutions for achieving energy conservation.
  • Implementation of an energy conservation plan and facility retrofit, providing savings and improved conditions.
  • Long-term training and support for continued realized benefits.

The last point of the process is an important one to note. Firms who consider a utility audit a one-time quick fix are not benefiting as they truly should. Though a one-time audit can help find the most economical utility provider for your facility and inform you of any refunds that may be due your facility, an audit must be ongoing in order to be effective. In other words, analysis should be done on a regular basis, and not just when there's major changes in a facility.

Phalmann says many ms become lulled into thinking that it things such as occupancy stay the same and lights go off and on at the same time every day, energy usage and rates should remain constant and on going evaluation is unnecessary. This is untrue for several reasons, he comments. First, there may be errors or inaccuracies in billing. "Many people record bills, but are they really looking al it?" asks Phalmann.

Because rebates and refunds are of a timely nature, mistakes caught too late may be not be eligible. Second, rate changes can occur quite often, depending on the supplier. Since not everyone is notified of every rate change, an alternate plan may suddenly develop that's more suitable for your facility, but your company may never know about it.

That's where the role of the consultant comes in. Consultants act as a sort of "safety net" that stay on top of rate changes and new offers, so you don't have to. This is especially important in areas where utilities are greatly affected by deregulation. The marketplace in these areas is dynamic, and evolves constantly-especially in terms of rates. Therefore, a sound utility plan developed for your facility even as little as a year ago may quickly be outdated unless analysis is ongoing.