9 Ways to Reduce Your

Energy Cost
HIGH-ROI ENERGY-PROCUREMENT IDEAS FOR
LARGE ORGANIZATIONS
By David Vranicar, Verisae
3/3/2010

9 ways to reduce your energy cost

INTRODUCTION
For many large organizations that operate multiple facilities, the simplest, fastest and least expensive way to reduce the cost of energy is to
refine your energy-procurement practices. Yet four key challenges may
have prevented your organization from achieving the benefits you otherwise could:
You may not be aware of all the opportunities.
The topic can be complex, especially if you work with multiple utilities.
You need accurate, detailed data. In many organizations, such data
are not readily accessible in useful, actionable form.
Maybe you havent yet dedicated the right resources to the task. Or you
havent got the right processes or systems in place to a do a proper job.
The ideas you will read here are generally fast, straightforward, nondisruptive and relatively low in cost to implement.
You will get the most out of this report if you fit the following description:
You are responsible for reducing the cost of energy in your organization.
Your organization consumes more than 10,000,000 KwH of energy in
a year.
Your organization operates in more than a dozen buildings and possibly on multiple sites.

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9 ways to reduce your energy cost

3 ways to think about your energy costs

This report focuses on ways to pay less for energy you buy.
Your energy-related costs fall into one of three categories:
1. The amount you pay your energy suppliers.
2. Your portfolio of energy sources, including utilities, on-site renewable energy, and purchased Renewable Energy Credits (or RECs).
3. The cost of maintaining the efficiency of equipment that consumes energy.

The energy supply side vs. the demand side

This and subsequent reports in the series address four substantially different but interrelated ways to
reduce total energy cost:
Pay less for the energy you buy.
Rebalance your energy sources.
Use less energy.
Find a more optimal balance between energy prices you pay and the energy you use.
A separate report addresses ways to reduce the cost of maintaining the efficiency of equipment that
consumes energy.
We refer to the first two ways to reduce energy cost as supply-side methods. The third method is
demand-side. The fourth is a hybrid of the first and third.
This report focuses on ways to pay less for the energy you buy. You will also find here a brief discussion of
the data, systems, processes, and resources youre likely to need to implement the ideas suggested here.

9 ways to reduce your supply-side energy costs

To reduce the cost of energy you buy, consider making some or all of the following changes to your
energy-procurement practices:
1. Consolidate all your utility billing data in a single place where all parties in your organization can use
it easily.
2. Pay the lowest-cost tariffs you can.
3. In deregulated markets, choose the lowest-cost provider for your usage patterns.
4. Avoid overpaying your utility. Find billing errors.
5. Take advantage of all utility rebates and incentives.
6. Claim all the carbon credits you can.
7. Dont let your utilities sit on large amounts of your deposit money.
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9 ways to reduce your energy cost

8. When you open new facilities or locations, make sure youre

THE BEAUTY OF MANAGING ENERGY

WITH SPREADSHEETS

billed at the most favorable rate from the start.

9. Take advantage of other special programs your utilities may
offer.
Congratulations if youre already doing some or all of these
things. Our experience with more than 40 companies suggests
that youre in the minority. You look to further reduce your energy costs on the demand side, as subsequent Verisae reports
suggest.
Even if youre already doing many things well, please skim
through some of the detailed discussions that follow. They
may offer some nuances that can help you save additional
money.

1.Consolidate utility billing data in a single place where

all parties in your organization can use it easily.
Excel spreadsheets are the leading software application
used to manage energy data in organizations of all sizes.
There are plenty of solid reasons for their broad appeal
(sidebar, p. 3).
But they also have their limitations (sidebar, p. 4). To avoid these
shortcomings, you must invest a good bit of, well, energy. You
must invest enough forethought and coordination to use spreadsheets effectively. You may also have to
come to agreement across business functions with diverse needs. You may have to consider differences
across legal or regulatory jurisdictions, state or national borders, cultures and languages.
To help you navigate these complications, it may be wise to engage your IT organization or outside
consultants. Even with such help, you can still get it wrong unless you work with someone who has built
systems to manage energy before. It takes about three times to start getting it right.
If you feel ready to move beyond these limitations, you have several alternatives that can take you far
beyond what you can achieve with spreadsheets.

Beyond spreadsheets: digital scanning and imaging of bills

One useful next step is to scan and digitize your utility bills so their details are easily accessible online.
This enables you to capture all the data that can help you reduce your bills. It can also make such data
available for convenient use by multiple functions within your organization including, for example, your

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9 ways to reduce your energy cost

energy-procurement, energy-conservation, facilities, and

THE CHALLENGES OF MANAGING ENERGY

WITH SPREADSHEETS

Accounts Payable groups.

Be aware that making digital images of all your utility bills
available online is not the same as making all your energyrelated data searchable or reportable for everyone who
needs it.

Creating an online database

To make your utility billing data available for thorough reporting and analysis, you must capture it through keyboard entry or
optical character recognition (OCR).
Your biggest challenges will be to come to consensus on the
needs of all the groups who will use the data, to overcome any
internal resource limitations you may face, and to eliminate
data-entry errors.

If youd rather not do it yourself

One alternative is to outsource the capture, presentation and
reporting of data from your utility bills. In doing so, you can
choose from a wide variety of utility bill-processing service
providers.
Many can set up a software application that captures all your
data and makes it easily (but securely) available to everyone in
your organization who needs it. Everyone can get all the data
they are authorized to see. They can prepare their own reports
and analysis.

You can capture all the data that appears on your utility bills, and you can see it in a presentation thats
consistent across all utilities, regardless of their billing formats.
You can enter the data yourself or you can have the service provider do it for you. A very few service
providers (including Verisae) will guarantee 100% data accuracy.
You can pay your bills yourself or you can have your service provider do it for you.
In some cases you need only a web browser. Theres no need to buy computer hardware or to involve you
IT organization in setting up databases or data-transfer interfaces.

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9 ways to reduce your energy cost

2.In deregulated markets, choose the lowest-cost

WHAT DATA TO CAPTURE FROM YOUR
UTILITY BILLS

provider for your energy usage patterns.

[Note: If all your operations are in regulated jurisdictions (sidebar, p. 6), this recommendation wont save you money. Skip to
suggestions 3 through 9.]
Seventeen U.S. states or districts currently enable buyers
of electricity to reduce their cost by choosing their supplier
from among two or more competing utilities. (By contrast, you
have no choice of provider if you operate only in regulated
states.)
Similar deregulation has also occurred for natural gas, but
the opportunities for savings are generally smaller than for
electricity.
The best utility for your needs is not always obvious. It may be
that no single utility is the best choice for all your facilities, even
within a tight geographic area.
To evaluate the real cost for each utility youre evaluating, you
will need detailed information about all available tariff schedules
from each utility.

The rate structures of competing utilities may be hard to compare side by side because utilities often
structure their rates in different ways. To make a proper evaluation, its important to understand which
components of the rate tariff are deregulated.
It is also important to understand what add-on fees deregulated suppliers may include in their rates. Find
the base-rate tariff for each utility so that you can make apples-to-apples comparisons.
In addition to looking at base rates, also consider any rebates, incentives or credits that each utility may offer
you to invest in improving your energy efficiency. (See more on this in Suggestion 3 below.)
If your operation has flexibility to limit your energy load during periods of peak demand, consider which
utilities offer the best incentives to do so.
To decide which utility or combination of utilities presents the most economical alternative overall, you
will need solid historical usage data for all your operations. The more granular and detailed your usage
data, the more confident you can be in making your decisions. And the more money you are likely to save.
Depending on the kind of supply contract you may execute with deregulated utilities, it may also be wise
to dedicated person to watch the market for ongoing opportunities to buy additional energy layers or
blocks when favorable market conditions arise.

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9 ways to reduce your energy cost

3. Pay the lowest-cost tariffs you can.

ENERGY DEREGULATION BY JURISDICTION

Assuming you know which utility companies you will buy

from, the next step is to be sure you pay the lowest tariff
rates for which you qualify.
This suggestion may not be as obvious as it looks. If
youre a large enough user of energy and can shift your
load from one time of day to another, consider signing up for a time-of-use (or TOU) rate. Under such rate
structures, the amount you pay for electricity varies by
the time of day. If you can shed load during peak times
(i.e. midday) you can save money compared to paying a
flat, fixed rate.
If you operate multiple buildings or facilities even if
only one or a few utilities serve them all you may benefit from getting the most economical tariff rate for each

facility.
Your evaluation gets much more complex if your organization operates dozens, hundreds or thousands of locations
in many states or across national borders. The number and variety of tariff schedules is much greater, and
your volume of historical usage data is quite large. Your opportunity for savings is bigger still.
You have three options for getting this rate analysis done:
1.You can do it yourself, using internal resources and spreadsheets or whatever systems you use
now.
2.You can hire a service provider to do it for you each time you need it.
3.You can work with third-party software that enables you to do it whenever you like. With such systems in place, you can repeat the process any time you think your energy usage patterns or utility
tariffs have changed enough for you to reevaluate your options.
If you spend more than about $2 million a year on energy, you may find it economical to hire full-time or
part-time analysts to check the potential savings for each rate scenario.
If your internal systems are inadequate, if you face headcount constraints or you think your opportunity
for savings is relatively small, your best option may be to use third-party software that helps you make
your decisions. It will probably cost less than you think.

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9 ways to reduce your energy cost

4. Avoid overpaying. Find and eliminate billing errors.

IF YOU DECIDE TO LOOK OUTSIDE FOR HELP

Do you have effective ways to identify and manage utility billing errors? If not, you can probably reduce your
total energy spending by 1% to 3% by putting such
measures in place.
Utility billing errors are typically of one of two types:
The utility charges you a higher rate than you should
be paying.
The utility makes a mistake reading your meter and
charges you for more energy than you used.
In Verisaes experience, the first error is much more common. But the more utilities you work with, the more opportunity you will have to uncover errors of both kinds.
Some organizations use their own resources or thirdparty services to conduct periodic audits of their utility
bills. Verisae has worked with one company that discovered a $3 million billing error through such an audit.
Periodic audits can certainly help. But internal auditing
groups may not be able to perform audits as often as
would be best for catching most errors. Any audit is timeconsuming and resource-intensive if you dont have easy
access to utility data. And audits can be expensive if you
use outside services to conduct them.

Use systems to monitor your utility bills

As an alternative to performing audits, you can also set up systems and or services that will catch such
errors as they occur. This approach has these advantages:
It monitors for errors constantly rather than periodically.
You can catch errors earlier so you have better cash flow and can put your money to better use.
You can avoid negative effects on quarterly financial statements.
It may cost less than periodic auditing.
You may find it most cost effective to work with a third-party vendor that can provide utility-bill processing services for you (sidebar, p. 7).

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9 ways to reduce your energy cost

5.Take full advantage of rebates, tax breaks and

CHALLENGES IN MANAGING REBATES

other incentives.
Is your organization overlooking ways to get help in paying
for your energy-conservation initiatives?
In many cases you can get some or even all the cash you
need without applying for loans. You may need to look no
further than your energy utility, which might reimburse part
or all of your costs.
Maybe this sounds too good to be true, but its not.
Many electrical and gas utilities offer their customers
rebates to encourage investment in energy-conservation measures. The payments cover equipment such as
heating, ventilation and air-conditioning systems, lighting, motors, occupancy sensors, cooking equipment
and more.
How common are such rebates? They are common enough
to make it worthwhile for you to do some research. U.S.
electric and gas utilities collectively offered more than $3
billion dollars to corporations in 2008.
Utilities dont offer these programs because they have
deep pockets or big hearts. They do it because its more
economical for them to motivate you to reduce your
energy demand than to build more production or distribution capacity.
Ultimately, you pay for the benefit whether you use it or
not. Where such rebate or incentive programs exist, you

and other utility customers finance them through surcharges to your monthly bills. These add-on fees
may appear on your monthly statement as a Public Purpose Charge, an Energy Efficiency Rider or
some such.
Although you and the utilitys other customers pay into the program, not all of you will get your surcharges back in the form of rebates or credits. It takes more effort than some are willing to invest.
If you have adequate staff resources and the desire to explore your options on your own, start your
research by visiting the websites of your utilities and your state energy offices.

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9 ways to reduce your energy cost

If you choose to hire a service provider (sidebar), its important

IF YOU DONT MANAGE REBATES FOR YOURSELF

to find one that understands utility rebate programs and also

understands the mechanical and electrical specifications of
energy-consuming equipment. Such knowledge and experience can help you in two ways. It can guide you toward alternate equipment that may help reduce your energy consumption in the future. And it can help you secure larger rebates
from your utilities.

6. Claim all the carbon credits you earn.

The European Union has initiated a system that provides economic rewards for using energy from sources that generate
relatively low levels of carbon dioxide and other greenhouse
gases. The goal is to shift big energy users away from sources
believed to cause climate change.
The United States and other industrial countries have also
taken steps in the same direction. World governments appear
likely to continue offering economic incentives to reduce the
burning of fossil fuels that release large amounts of carbon.
Through one such arrangement, organizations can qualify for

carbon credits by reducing the amount of carbon released

by the energy sources they use. These carbon credits can be
exchanged for cash through regional climate exchanges (see
callout).

THE VOLATILE VALUE OF CARBON CREDITS

Climate exchanges now exist in Chicago, London, Tokyo, Beijing and _____.
By operating the same way as the equity, bond and commodity markets, climate exchanges enable
supply and demand to set the value of carbon credits.
In these early days of the climate exchanges, the value of carbon credits can swing greatly. For example, value fell dramatically from $___ a ton before the Copenhagen Climate Summit in January
2010 to $0.10 a ton shortly after.
Because of such volatility, owning carbon credits is not like having money on deposit in an FDICinsured bank account.
But if you accumulate carbon credits when their value is low, it can be like buying equities when the
stock market dips. Your investment is more likely to go up in value than down.

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9 ways to reduce your energy cost

Carbon accounting is an emerging field, and standards are only starting to be set by the Financial
Accounting Standards Board (or FASB). Practices are certain to change in the coming months and years,
but that shouldnt keep you on the sidelines.
Your best bet is to document everything youre doing today to achieve energy efficiency. Your foresight
may qualify you for carbon credits down the road. If, for example, youre retrofitting your lighting fixtures
to achieve greater energy efficiency, document it in detail now. Make sure your records are complete and
easily assessable.

7. Dont let utilities sit on your deposit money.

When you open a new facility or establish a new energy account, most utilities will require you to pay a
deposit to ensure they will get their money even if you miss payments. Some utilities will accept a surety
bond or letter of credit in place of a cash deposit.
Rules vary by utility, but most utilities require you keep your deposit on file until youve established that
you consistently pay your bills on time. They may keep your deposit for a year or longer.
To get your deposit back as soon as possible (with interest, if your utility will pay it), track both the
amount of deposit you pay each utility and also the utilitys rules for getting it back. In Verisaes experience, it can be a mistake to assume that all utilities will be proactive in returning your deposit money. You
may have to shake the tree to get it.

8.When you open new locations, be sure your utility charges you the most favorable rate from
the start.
When you build new facilities, most utilities provide energy at temporary construction rates until you open
for business. You can save money by ensuring that the transition from your construction rate to your
normal operating rate occurs quickly.
If you have similar facilities operating with the same utility service territory, you can use the billing history
for your established facility to determine the best rate for the new one.
If you dont have such information, you may have to estimate the best rate until youve accumulated a full
year of baseline consumption data for the new facility.

9. Take advantage of other special programs your utilities may offer.

In addition to rebate programs, many utilities offer free energy audits, special rate tariffs tailored to
specific needs, or new programs to encourage you to conserve energy or at least to shift your demand to
off-peak hours. Research the website of each utility company or contact your utility account representative to determine if they offer these services.

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9 ways to reduce your energy cost

Summary and Conclusions

This report has presented nine suggestions for reducing your energy costs on the supply or procurement
side.
Your ability to implement any of these recommendations requires ready access to good data that present
a clear picture your energy costs and energy-consumption patterns over time.
If you draw only one conclusion from this report, we hope it is this: If you arent doing so already, immediately begin capturing all the data that appears on your utility bills.
Whether you do this yourself or you look outside your organization for help is less important than getting
started now, however you can.
If you cant do it effectively with internal resources and systems, wed appreciate the opportunity to
discuss how we might help.
With our help you can start as small as you like and go at whatever pace you like. To get started with
Verisae is probably faster and easier than you imagine. It is probably also less resource-intensive, less
disruptive and less expensive.

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9 ways to reduce your energy cost

About VeriSae
Verisae (www.Verisae.com) develops, markets, and licenses Sustainability Resource Planning (SRP) , an
enterprise solution that empowers organizations to make sustainability actionable. Verisae helps
measure, manage and monetize energy costs and carbon emissions. SRP covers the core functions of
sustainability needs by combining multiple business processes and systems into one database to use
across the enterprise. Our platform improve operational efficiency, make sustainability initiatives actionable,
and reduce energy costs carbon emissions for distributed enterprises and energy companies.

Environmental Management

Asset Management

Carbon Emissions Manager

Service Manager

Scope 1 & 2 Emissions

Service Provider Management

Scope 3 Emissions

Financial Management

Sustainability Project Manager

Asset Manager

Water Manager

Facilities Management

Waste Manager

Equipment Management

Energy Management
Energy Supply Manager
Utility Bill Processing
Active Energy Response
Utility Contracts Management
Energy Spend Manager

Asset Monitoring & Alarming

Parts & Inventory Management
Procurement Manager
Rebates & Incentives Management
Total Capital Planning
Equipment Procurement

Energy Demand Manager

Real-Time Energy Management
Active EE Dispatch
Energy Efficiency Projects
Given the heightened priority of corporate sustainability, Verisae is positioned right now to enable
organizations to establish a carbon footprint baseline, outline energy management options, and provide a
comprehensive corporate sustainability action plans in a manner of months. All of which can be implemented with metrics in place to highlight bottom-line cost savings and return on investment timelines.
Today, Verisae delivers a broad range of sustainability solutions to over 40 global clients with a service
network of 7,500 third party service providers consisting of 60,000 application users. Our integrated
sustainability platform actively tracks over 2,100,000 million assets across 20,000 sites. We help
measure, manage and monetize energy costs and carbon emissions. We are uniquely position to help
organizations prove return on investment (ROI) for sustainability initiatives.

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