FM Issue: Cutting Costs With Monthly Utility Bill Analysis

Photo: JupiterimagesBy Suzanne Figy
Published in the July 2011 issue of
Today’s Facility Manager

Facility managers (fms) need to know the ins and outs of power costs including ways to scrutinize a monthly utility bill to lower energy costs and alternative ways to power a facility. First, fms must decide if they have the resources to monitor and capture the information on their monthly utility bills. This process can be undertaken internally or outsourced to an energy management firm (often a practical option for larger, multi-site properties due to the high volume and coordination involved).

When analyzing bills, fms need to identify the areas with the largest expenses, whether it is natural gas, electricity, or water. The type of business will determine where the greatest energy efficiency and cost cutting resides. For example, an office building has great opportunities in lighting, heating, and HVAC. A restaurant should look into its cooking processes, while a grocery store should track the amount of energy used by freezer/refrigeration equipment, etc.

The best way fms can evaluate where they are in terms of energy consumption and costs is to benchmark their energy use. This means collecting a year’s worth of billing data—enough to give fms what they need in order to analyze monthly utility bills and decipher any usage trends. Understanding this data is essential, as the expenses of electricity, gas, water, and sewer often represent up to 25% of a business’ total operating costs.

Using this data, fms can develop a load profile and benchmark performance to reflect energy usage for each property. This information will allow them to consider and compare how demand might be affected by operating hours, occupancy, temperature, and lighting.

Reading A Utility Bill

A utility bill has a multitude of data points to give an fm insight on a building’s energy usage. Professionals can set this information against their usage and see some opportunities to cut down on utility costs.

Each bill will have a few sections that will break down the data in varying degrees. The top portion of the bill is usually comprised of client information. This includes the bill issue date, the client’s account number, the amount due, the due date of the bill, and the client’s billing address, as well as the utility address.

The middle and bottom portions of the bill are where fms can find the most interesting data. Below the contact information, there will be a billing summary which shows previous balances, late charges, and adjustments. This section will also include the total amount due, including taxes and fees.

As seen in the illustration above (Sample A), a facility’s electric services use is broken down. Many users are charged for two different types of electricity consumption. First, a facility is charged for the total kilowatt of electricity that is used in the billing cycle. Typically, clients are billed at their rate classification per kilowatt hour of usage. One thing fms should keep in mind is that a rate is usually higher in the summer than the winter.

The second type of energy a facility is charged for is demand, which is the amount of power being taken from the utility at any 15 minute period. Utilities bill the specific demand rate per kW for the highest demand during the billing period. Once again, summer demand rates are normally higher than winter demand rates due to increased HVAC costs.

There are a few parts in this section of the bill, with the second column being the meter serial number (ex: 1735095). The second to last column is the how the electricity being used is measured (kW, kWh, KVAR). The kilowatt (kW) is the reading demand multiplied by the meter multiplier amount. Meter multipliers are used in large commercial clients since meters do not record the whole kilowatt hour of electricity. The kilowatt hour (kWh) total usage is the difference between the current meter reading and the previous reading.

The third through fifth columns are the energy usage period and how many days are in the billing cycle. Knowing the number of days in the billing period allows fms to normalize the usage to a daily value. Utility bills will also include the multiplier number, which is determined by the type of metering equipment. This determines the amount of energy usage. Finally, the top of the bill will also identify the rate class and load profile the facility is listed under.

Fms can track if there is a discrepancy by comparing the current usage with the snapshot of the same period last year, which will be included on most bills. In this sample bill, there is also a graph that tracks monthly usage for the past year. By tracking the usage patterns, fms could identify if the drop in energy usage is normal or if there is a need to investigate further. Usage will vary depending on factors such as weather, facility operations, and energy management conservation efforts.

Utility Charges

Fms can also break down costs and charges in a line by line manner by analyzing the monthly bill (Sample B, below). This can be a very important step if multiple facilities are managed and fms need to develop a budget. There will be a standard fixed charge, sometimes known as the monthly customer charge, which offsets costs that are not directly linked to energy usage. These charges are typically based on the client’s rate classification and by the number of days in the billing period. These are mostly administrative in nature and include the cost of the equipment, monthly meter reading, account management, etc.

Sample B

There can also be a demand charge, as previously mentioned, which is the greatest 15 minute usage during the billing period. Also discussed is the energy charge, which is the total amount of kilowatt hour energy used, multiplied by the charge per kilowatt hour for the client’s rate classification.

Many, but not all, electric utilities assess a fuel adjustment charge. As natural resource pricing is in constant flux, utilities use this fee as a way to pass through the cost of the products as rate schedules are locked in place. Some months, an electric bill can even decrease in costs due to this change. Fms also have to factor in sales taxes and other state governmental fees.

Reducing Costs

Once the basics are down, fms can easily detect anomalies and determine if there is an overcharge by the utility provider or an opportunity for repair. Overcharges usually occur due to meter malfunctions, utility rates that are not best for a particular business, incorrect billing calculations, bills for service at a facility that was closed or sold, and duplicate bills for the same facility. To rectify errors, the fm should be trained to spot these problems right away and contact the utility as soon as possible. The best way to monitor bills and identify errors is to compare monthly utility costs and consumptions to prior periods.

Identifying the problem prior to payment of the bill improves the chances of paying the correct amount. If the bill has already been paid, fms can contact the utility and document the error. This will improve the chance of a refund, as many utilities have a time period limit on which a refund can be claimed.

Another way fms can decrease costs is to investigate and apply for rebates. If there are any capital improvements made to the facility, the utility might issue rebates for new heat pumps or insulation, for instance. These rebates will be credited to the account and can cut down on bills each month.

Understanding Rates

Fms should also be familiar with the provider options available to them in regulated and deregulated markets, as these can profoundly impact costs. In a regulated market, the local utility company is the only available provider and rates are non-negotiable. That said, fms can perform a rate analysis to ensure the facility is on the correct rate plan. Changes in operations can allow a facility to qualify for a different rate, or there might be more affordable rates developed after the last review. Rate review should take place regularly, since sites open and close or demand characteristics change.

In a deregulated market, energy rates are negotiable and fms have more options when it comes to choosing an energy provider. The fm will need to understand the facility’s load requirements, as well as the company’s risk tolerance, before negotiating a deal, since this will lock in a price based on expected consumption for the term of the contract.

Renewable energy is another option that fms may purchase directly from their electricity provider, whether it is solar, wind, or another form of alternative energy. There may be a cost upfront to purchase this greener power, but it is often temporary, especially if fms can lock in a rate for a longer period. After a few years, it is often found that the green power at a fixed price is cheaper than the price of standard electricity.

To recap, educated fms must know how to read and interpret their monthly utility bills correctly. Not only will this improve the bottom line, it can help identify opportunities to improve efficient and sustainable performance.

Figy is director of expense management/utility Solutions for Spokane, WA-based Advantage IQ, Inc.