Income Guarantees Approved for FirstEnergy and AEP – Customers to Pay More for Power

firstenergymonopoly

In December, EPCO took a stand against the power purchase agreements that FirstEnergy and AEP presented before the Public Utilities Commission of Ohio (PUCO). Over the last several months additional hearings were held, and experts testified for each side, regarding the viability and potential consumer costs of the proposals. On March 31, the PUCO issued their ruling in favor of the power purchase agreements for both FirstEnergy and AEP. The complete order with opinions from the PUCO can be read here.

The PUCO has given FirstEnergy and AEP approval for an eight year rate plan. This plan will go into effect over the summer, following a set of auctions on pricing later this spring. Simply put, the customers in these territories will be subsidizing FirstEnergy and AEP to ensure they turn a profit through 2024. FirstEnergy has argued that over the eight year term, the rates consumers pay will be lower in aggregate (projected at $256 million), following an initial increase in the first couple years.

However, many in opposition including the Ohio Consumers Council believe this deal will cost consumers at least $3 billion over the eight year term. Some estimates have even put the cost to consumers at nearly $6 billion. There is clearly a stark contrast regarding the potential cost to consumers. This divide is due in large part to differing assumptions regarding where the natural gas market, and state of renewable energy, will be in the future.

To understand this argument better, let’s take a brief step back to evaluate how we got here. Historically, most electricity in Ohio has been produced from coal fired plants. But over the past five years, half the large coal fired plants in the state have been retired.  During that time, generation from coal dropped from 82 percent throughout Ohio to 59 percent.

There are two significant reasons why this shift has occurred. First, the influx of natural gas in the market has provided a less expensive and cleaner alternative to coal fired generation. In just the past couple of years, the price for natural gas is down roughly 60 percent and trading below $2 on the stock exchange. The second issue is the increased cost of compliance due to additional federal and state regulations levied on coal and nuclear plants.

The utilities were able to successfully argue to the PUCO that their coal fired and nuclear plants are unable to compete in this changing market. As more natural gas fired plants come online, and additional regulations are issued, it has become exceedingly difficult for FirstEnergy and AEP to compete. In order to ensure that their plants stay active and produce the necessary power for the regional grid, they required a subsidy from the consumer in the form of an income guarantee.

The utilities have argued that natural gas pricing is going to dramatically increase to bolster their claims that rates will precipitously rise in the future. According to their logic, once rates increase their plants become more competitive. The utilities added that the need for the income guarantee is short term until the market turns in their favor.

The only problem with this argument is there is nothing to support the utilities claims. To the contrary, a great deal of research, data, and market analysis has shown the opposite trends have, and will continue, to occur. The current freeze on the Ohio renewable energy portfolio is likely to expire by the end of the year. Even Governor Kasich has come out strongly opposed to any continued freeze.  Once this current legislation expires, private investment in renewable energy will continue at an increasing pace. Furthermore, many of the projections that FirstEnergy has cited have already been proven wildly incorrect. Natural gas prices continue to plummet to historic lows and show absolutely no signs of significant increase over time.

Groups such as the Ohio Consumers Council have vowed to challenge these rulings at the state level, while others seek appeals through the Federal Energy Regulatory Commission (FERC). Despite claims to the contrary, it is unlikely to change the outcome of the PUCO ruling. At this time, EPCO is warning clients that rates will be increasing in the near future. The PUCO ruling will result an increased cost of doing business that ultimately will adversely affect business growth and development in Ohio. As such, the best course of action to take is reducing the amount of electric consumption at your facility through a comprehensive set of energy efficiency measures. Be sure to consult your energy advisor on what your next steps should be.

Capturing Tax Incentives from Energy Retrofits

firstenergymonopolyAs we approach the month of April, we draw closer to the deadline to file our taxes. Though we all experience a bit of dread at this prospect, tax season doesn’t always have to carry a negative connotation. Unknown too many of the clients I work with, are a number of tax exemptions or incentives for the energy related retrofits that they perform. In many cases, the value these deductions present can be as lucrative to the project as the energy savings themselves.

Below is a very high level (and overly simplified) overview of three tax mechanisms available in the market today. There are certainly more to consider (qualified leasehold improvements and bonus depreciation), but these represent the most reoccurring opportunities I have found for my clients. Some have strict deadlines regarding when you can claim the deduction while others require detailed engineering studies. It is important to be aware these opportunities exist, but ultimately, you will want to work closely with your tax professional to capitalize on the full value.

EPAct 179D

This is probably the most commonly used tax tool we can offer to our clients. This federal legislation was passed in 2005 to provide a tax related incentive for businesses to curtail energy consumption. It offers up to a $1.80 per square foot tax deduction for improvements made to buildings. The deduction is available in three equal parts related to HVAC, Building Envelope, and Lighting. Each is eligible for a deduction of $0.60 per square foot.

Case Study: Recently, I worked with a manufacturing client on an LED retrofit for their facility. The building is approximately 40,000 square feet. This project was eligible for the $0.60 per square foot deduction through 179D. Their write-off on their tax returns is $24,000. To determine the actual monetary impact, we simply multiplied their deduction by their effective tax rate. A top end tax rate of 39.6% yields a value of $9,504 of avoided tax payments.

Removal and Partial Disposition

This tax deduction allows you to write down the remaining depreciable cost basis of what gets thrown in the dumpster during a renovation or improvement of a building. Everything with a deprecation schedule can be included. It is a one-time tax benefit for building owners that can also incorporate the labor on the project. Each building and retrofit project is unique, so deduction values will vary. It is not uncommon to capture 15% to 25% of the total renovation value.

Cost Segregation

This is an approved IRS mechanism to accelerate depreciation of certain assets. Typically, most owners will utilize a straight line deprecation schedule of 39 years for their whole building. Cost segregation breaks our various components of the building and accelerates their depreciation schedule. Some key elements of cost segregation include the following.

  • Depending on the component, depreciation schedules can be reduced to 5, 7, or 15 years
  • This can apply to anyone who spent $250K or more on a building or $200K on leasehold improvements
  • The building should have been acquired or renovated in the last 15 years
  • Benefits will vary, but a general rule of thumb is $50,000 Income Tax Deduction per $1 million of building cost basis.  Benefits will range based on building type

 

Taxes always appear complicated and challenging to understand. Do not allow that to be a deterrent. There are too many great opportunities in the market to capture additional value for the work you are already performing. In addition, in many cases, I have found the deductions my clients can claim often make projects more tenable because of the reduced payback period. If you do not already work with a tax professional that can help you understand your options, feel free to contact me directly (eauerbach@energyplanners.com) and I can help pair you with a reputable professional in your community.

Understanding ASHRAE Level Audits

DSC_7446 (2)EPCO performs energy audits, or energy assessments, for commercial businesses throughout Ohio. Depending on geographic region, there may be utility incentives to cover the cost of the audit. Not all energy audits are made equal, and it is essential to understand the various levels of audits available. The primary goals of an energy audit are to determine how the building energy systems are performing, how improvements can be made to enhance that performance, and how those improvements will affect the owner in both financial and non-financial factors.

Energy audits vary in depth and complexity, depending on a variety of factors including building energy systems configurations, project parameters, and the capabilities the energy auditor can provide. ASHRAE (American Society of Heating, Refrigerating and Air-Conditioning Engineers) has defined three levels of audits that energy providers perform, which I will explain in greater detail.

ASHRAE Level 1 – Walk Through Analysis / Preliminary Audit

The ASHRAE Level-1 audit is the starting point for building energy optimization. This audit involves a review of the facility’s utility bills and operating data, a brief walk-through of the building and basic interviews with on-site operating personnel. This audit is intended to identify areas for potential energy improvements, understand the building configuration, and define the type and nature of energy systems. Your energy advisor should give you a short report detailing findings from the audit, which should identify an array of efficiency opportunities. Typically this report does not include detailed recommendations for improvement, with the exception of very visible operational and project flaws.

The ASHRAE Level-1 audit should help the energy team at a business establish a baseline for measuring energy improvements, and also give them an idea of how their building performs in relation to similar businesses. A common example can be found among many school systems. Often, they will have comprehensive controls in place for systems such as process cooling or heating. But, after years of evolving use, those control set points need to be recalibrated to align with existing facility use.

ASHRAE Level 2 – Energy Survey and Analysis

The ASHRAE Level-2 assessment builds upon the findings of Level-1, and evaluates the building energy systems in detail to define potential energy efficiency improvements. This should include the lighting, ventilation, building envelope, heating, and air conditioning (HVAC), domestic hot water (DHW), compressed air and process cooling or heating. This audit starts with a detailed energy cost and consumption analysis. Then, the assessment should evaluate air quality, lighting, humidity, temperature, ventilation, and other conditions that could influence energy performance or comfort of facility occupants. ASHRAE Level-2 should include in-depth discussions with the building management, ownership, and occupants to examine potential problem areas, and determine their goals for increasing energy efficiency.

Your energy advisor should provide you with a clear and concise report that includes a briefing to the building owner and management team, explaining a variety of Energy Efficiency Measures (EEMs) including operational changes, no-cost and low-cost measures, system controls and building automation modifications, and potential fiscal upgrades. The findings of this audit should also include performance metrics, as well as a method for the building owner to determine the next steps in proceeding with implementation of the plan. Anybody that hasn’t actively been involved with energy efficiency nor have an energy portfolio, we may put under the Level-2 umbrella. Very likely there is a cost associated with this audit, but depending on your geographic location, rebates may cover a good portion of it.

Recently, I had the opportunity to collaborate with a mid-size regional medical facility that asked us to complete an in-depth analysis regarding replacement of their existing HVAC system in exchange for a more efficient solution. Due to the complexity of the system and unique operation of the facility, equipment metering and engineering was required to identify the appropriate solution for the building’s needs. This required a cost, but the majority was covered through local utility incentives.

ASHRAE Level 3 – Detailed Analysis of Capital Intensive Modifications

The ASHRAE Level-3 audit is a very in-depth and detailed energy assessment. This audit involves data collection over the course of weeks or even months. Data loggers will monitor temperatures of affective space, lighting levels, pumps and motors operation, switching behavior, and other factors. This audit requires an intensive facility-wide assessment. We try to steer our clients away from this audit if at all possible, due to its high cost and length of time required. We would only perform this audit in specific situations. One such example would be businesses governed by strict regulations that mandate this level of reporting on an annual or semi-annual basis.

Conclusion

A carefully crafted energy plan will empower your business with the ability to more seamlessly manage your energy portfolio. At EPCO, we design a plan that factors each component of your specific energy fingerprint, including how you use energy, when it’s consumed, and most importantly, where you can save without disruption to your operation.  Whether you move forward immediately with each measure, or wait for a more opportune time, you will be better informed and prepared. For more information on energy planning, contact eauerbach@energyplanners.com or 216.559.4103

4 Essential Tips to Prepare for the Next Recession

2016 is off to a rocky start and some economists are predicting a recession. Over the first two weeks of the year, the markets are trading down over eight percent. Chinese stocks have dropped more than 20 percent and have entered into bear-market territory. As the second-largest economy behind the United States, a slump of this nature will have an indisputable effect. Regardless of the direct fiscal impact to the U.S., the volatility in China will continue to send ripples through the global economy.recession-blog-photo

The dramatic decline in oil prices will also play a large role in the instability of the US economy. The price per barrel has dropped below $30; a 12-year low. The past year has seen prices plummet nearly 39 percent and almost 17 percent in just the past month. This has certainly been met with glee by consumers, as the price at the pump has dropped below an average of two dollars nationwide. However, the players on the world stage aren’t nearly as elated. China’s woes have further exasperated the market while oil producing states, such as Saudi Arabia and Russia, have seen dramatic declines in profits. Many smaller fracking and energy companies in the U.S. may be forced to shut down as well.

Furthermore, the fiscal policy of the Federal Reserve has amplified volatility. Continued tightening of monetary policy will reinforce the dollar’s strength and weaken U.S. exports. In turn, this could negatively impact the manufacturing sector, which represents over 12 percent of the U.S. GDP, and nearly nine percent of total employment (in 2013). Many news outlets have cited a December Citi Research report projecting the likelihood of a recession in 2016 at 65 percent, the highest odds in several years.

As the economy continues to foster uncertainty and instability, I am advising many of my clients to begin taking steps to protect themselves against a potential recession by years end. Here are four industry tips to get you started.

1. Evaluate Existing Contracts
•  Review in detail all your current and proposed equipment maintenance and service contracts. Be sure all maintenance and service agreements have significant returns on investment. Don’t simply allow contracts to roll over; instead negotiate for the best terms possible.
•  Evaluate your gas and electric generation contracts. Be knowledgeable on the current state of the market. It is extremely likely there has been a dramatic shift in market conditions since your last contract. Review with your energy advisor if you are uncertain on prevailing market value or contract terms.

2. Modify Behaviors: Little Changes Can Cause Big Savings
•  Turn off ancillary office machines and lighting when not in use.
•  Shut down non-essential equipment during down-time in production.
•  Evaluate facility energy systems to remove vampire power in standby mode.

3. Institute Controls and Energy Management Systems
•  Install a comprehensive controls platform and dashboard to enable you to monitor and manage your energy systems from one devise.
•  Mount sensors when possible to ensure systems such as lighting aren’t in perpetual use.
• Incorporate variable frequency drives (VFDs) on mechanical equipment to control the speed and energy output of motors.

4. Create a New Income Stream-Take advantage of the suite of utility rebates, tax incentives and financing structures that will increase your energy portfolio’s return on investment.
• Enroll in the “RIGHT” demand response program that will compensate you for curtailing energy usage at times when the grid is overly taxed.
• Talk to your advisor about maximizing energy related tax deductions (EPAct 179D) and capitalizing on accelerated depreciation.
• Take advantage of the many financing solutions available that provide immediate net savings for energy related projects. These are offered by many traditional banking institutions, Port Authorities, PACE financing agencies, and in the form of Energy Service Agreements (ESAs) by reputable energy planning companies.

The markets and the economy are cyclical. It is inevitable that we will have downturns and recessionary periods. We cannot predict what the next recession may look like, but we can take steps to lessen its effect. Working with an energy advisor, instituting long term energy management plans, and making low-to-no-cost investments, will better protect your business, resources and most importantly your wallet.

2016 Energy Industry Predictions

2016-energy-predictions-blog2015 has proven to be a very interesting and dynamic year in energy. Events large and small have had an economic impact both globally and locally across the country. A few notable highlights include this year being the hottest year on record, oil prices trading below $35 a barrel, and renewable energy possibly reaching a global tipping point.

I have spoken to many clients over the past couple of months inquiring about what 2016 has in store. The most frequent inquires I get pertain to what will happen with the markets, legislation, and regulations affecting how they will do business in the upcoming year.

I spent the better part of the fourth quarter researching and interviewing fellow industry experts to ascertain where the industry will go in 2016. Below are my energy industry predictions for 2016.

  • Nationally, the supply of natural gas is up compared to this time last year. The regional transmission grid (PJM) serving Ohio has announced it has adequate capacity to meet energy demands this winter. This winter is projected to be warmer than average. Taken collectively, this means businesses should expect energy prices in our region to trend lower and costs to be down this winter compared to last year.
  • After two consecutive summers of dramatically increasing electric rates, consumers in northeast Ohio can expect much better pricing during the summer of 2016. Many consumers wisely locked into longer two and three year fixed rate contracts over the past two years. For a large number of consumers, those contracts are expiring during the first half of 2016. Now is the time to explore new contract terms with your energy advisor.
  • LED lighting technology, efficiency, and pricing improved dramatically over the past year. Though there will continue to be improvements to the technology, it is unlikely the industry will achieve improved pricing at quite the same rate. Businesses that have been waiting to install LEDs until the market reaches a plateau on pricing, may want to consider 2016 as the year to make their move.
  • Contrary to popular belief, there are still incentives available for energy efficiency retrofits; you just need to know where to look. There is a very good likelihood that SB 310, which froze the energy portfolio standards in Ohio, will expire by the end of the year. That means businesses could expect a return of the rebates First Energy once offered. But large electric consumers still have incentives they can capitalize on in the form of an exemption to costly riders attached to their electric use. Businesses should consult their energy advisors to learn more.
  • Columbia Gas of Ohio customers will continue to have access to favorable rebates. Columbia provides service to a majority of counties throughout Ohio. Their rebate program is very comprehensive extending from residential to commercial and new construction.
  • President Obama’s Clean Power Plan will continue to foster dialogue and potential turmoil within the energy market. State lawmakers and utilities have cited that the plans objectives will prove prohibitively costly to plant operations. A number of states, including Ohio, have already filed suit against the EPA in court. Either way, the end result will affect energy markets.
  • The Federal Government passed, and signed into law, a $1.1 trillion budget and tax extenders bill at the end of 2015. Included was an extension of Section 179D in the tax code that allows for qualifying businesses to receive up to $1.80 per square foot in deductions for eligible energy efficiency projects.

The energy markets are historically too volatile to perfectly predict. One certainty though is those businesses that are prepared with a plan are better insulated against unexpected weather anomalies, global crises, and unforeseen regulations. Be sure to consult with your energy advisor about implementing a contingency to properly manage your energy portfolio in 2016!

4 Proven Steps to Get the Best Electric Utility Rate

electric-utility-dealOhio’s SB3 deregulated the electric market in 1999, and by 2001, commercial and industrial businesses were able to select their own electric generation suppliers. However, by 2008, 90% of the market still acquired their generation from their utility directly. The intent behind deregulation was to increase competition through “shopping” and ultimately drive down pricing for the consumer.

Today, many businesses are seeing the benefit of shopping beyond their utility to service their electric generation. Despite this, most clients I work with haven’t fully taken advantage of the increased competitive landscape. In my experience, mid-market businesses shop similarly (if not identically) to the small commercial and residential markets. Mid-market businesses typically field offers from brokers and suppliers; evaluate a fixed rate option versus a variable rate option; and consider one, two or three year terms.

This method of shopping will certainly get a deal done, but leaves substantial savings on the table for larger energy intensive businesses. Let’s evaluate this concept further using two examples.

Example 1:  A local hardware store is in need of a new electric generation contract. They use 28,000 kWh annually and approach a broker about a potential deal. The broker fields a few offers in the market and returns with the best option. A two-year fixed rate deal at 6.85 cents per kWh. Over the course of the agreement, our hardware store owner will pay a total of $3,836 for their electric generation.

Perhaps if they had used an energy advisor, they may have saved 2/10 of a penny per kWh. That a savings of about $112 or nearly $5 per month. In truth, that’s probably not enough savings for our hardware store owner to fret over. Shopping on their own would likely work just as effectively. But for larger energy intensive businesses, the difference of a few tenths of a penny could be substantial.

Example 2: A mid-sized manufacturer that consumes 6 million kWh annually is looking for a new electric contract. The facility director for the plant approaches a broker and inquiries about what electric contract would be best for the business. The broker then evaluates a few options and returns with the best deal. As a larger user, the manufacturer has increased purchasing power. As such, they receive a more favorable rate of 6.55 cents per kWh for a two-year fixed rate contract. Over the term of the agreement, our manufacturer will pay $786,000.

However, had they utilized a knowledgeable energy advisor, they could conceivably have secured a deal that was 3/10 of a penny less per kWh. Over the course of a two-year agreement, that amounts to a savings of $36,000 or $1,500 per month. Almost all my clients would consider that a savings worth pursuing.

The logical question our manufacturer would now ask is how they can take advantage of that better pricing. Below are some helpful tips to get the best deal possible for your business’ unique energy portfolio.

  1. Explore shopping through an auction platform. Suppliers will offer only one price while brokers may provide two or three. On an auction platform, you have access to every potential supplier in the market bidding for your business.
  2. Most businesses choose between a fixed rate and variable rate option. Consider a blend of both, where you capitalize on rates when they are low while insulating yourself against potential market volatility.
  3. Do not wait to shop until a month or two prior to your existing contract expiration. The closer to expiration, the higher the pricing will be. Begin exploring options at least six month beforehand.
  4. Try to buy when pricing trends lower during the winter months. As demand declines during the cold season, so too does the pricing in the market.

Be sure to work with your energy advisor to understand the complexities of shopping for an electric contract and securing the best option for you and your business.

Return to the 1990’s- FirstEnergy Monopoly is Wrong for Ohio

firstenergymonopolyOhio utilities are appealing to the Public Utility Commission of Ohio (PUCO) for a multi-billion dollar bailout in order to continue operating costly power plants at a profit. After a nearly seven year push by Ohio electricity utilities to secure profit guarantees for their power plants, a decision is close to reality. The deal will effectively create a monopoly for FirstEnergy and AEP to purchase electricity from their unregulated subsidiary power plants, at above market rates, and re-sell that power to consumers at a guaranteed profit.  FirstEnergy and AEP argue the deal is necessary to maintain grid reliability, additionally stating that these plants may otherwise close if this agreement does not occur. Both utilities further cite their inability to compete with newer gas-fired plants.

Who makes the decision?

According to a recent article in the Columbus Dispatch, FirstEnergy is working to finalize a revised 8-year agreement with PUCO staff. Earlier in September, PUCO staff rejected the original FirstEnergy proposal for a 15-year deal. Regardless of staff recommendations, the PUCO 5-member board has the authority to accept or reject any proposal.

What happens next?

FirstEnergy and AEP have concluded their trial-like hearings, following testimonies from several dozen parties over the last month. Currently, formal discussions are now in place to hash out the details and logistics of a revised agreement. Once completed, the PUCO will review the case and rule, which will likely occur sometime in early 2016. However, if there is a settlement, the process could conceivably be prolonged, and there will be another round of hearings to re-examine the benefits of the deal.

Why we agree with opponents

EPCO firmly believes this agreement will lead to higher commodity prices for consumers and ultimately prove harmful to the business community at-large. FirstEnergy invested heavily in coal at a time where natural gas prices plummeted. FirstEnergy is now looking to the consumer to bail them out of a bad bet. FirstEnergy should solely be held accountable for investment decisions that have failed to pay off.

Opposition to this newly proposed agreement has been swift and fierce. Opponents of the deal argue that a bailout of this nature only serves to benefit the utility companies’ at the expense of consumers. The claims made by the utilities of projected future consumer savings have been deemed as patently false.

In the 1990’s,  FirstEnergy worked to deregulate the energy market and were a key component in making that happen in 1999. During the next 8 years, FirstEnergy talked about how it “improved the productivity of its generating fleet by 27% and added about 1,600 megawatts of capacity, at no risk to the customer.”

When Ohio manufacturers wanted to re-regulate utilities in hopes of getting lower energy rates, FirstEnergy argued that, “flip-flopping between regulation and competitive markets whenever one offers a lower price than the other undermines the ability of utilities to make the investment decisions needed to maintain reliable and adequate service. And, if the basic rules of our industry are rewritten every eight years of so – irrespective of the long-term impact of doing so – major providers of capital won’t risk investing the billions of dollars it will take to meet Ohio’s energy needs in the years ahead”.

We do not want to return to monopolies

Now, FirstEnergy is working to re-regulate utilities, with the intent of becoming a subsidized and protected monopoly once again. FirstEnergy is struggling to compete in the regional electricity market. If the bailout doesn’t occur, FirstEnergy has spoken out saying it would support Ohio legislators overturning the deregulation legislation FirstEnergy once fought for in the 1990’s, which would in turn, make the company a monopoly protected from competition.

At EPCO, we believe that consumers, both large and small, should have the right to shop for a low competitive price on their electric generation. This proposed bailout amounts to nothing more than monopolies for FirstEnergy and AEP in their respective territories. The end result will be an increased cost of doing business that ultimately will adversely affect from business growth and development in Ohio.

Energy Upgrades—Is Total Cost of Ownership the Best Way?

total-cost-of-ownershipWhen evaluating energy upgrades, the #1 question a business will ask is always, what is the return on our investment (ROI)? How much am I (really) going to save from doing this project? Traditionally in energy efficiency projects, Total Cost of Ownership analysis is the universally accepted way of determining ROI. While total cost of ownership is a good benchmark for evaluating the value of energy upgrades, it isn’t the ‘be all end all’ way of determining the projects benefits. In this blog, I’ll discuss total cost of ownership analysis, as well as additional methods for getting the most accurate ROI projection for your energy efficiency project.

Total Cost of Ownership (TCO) is defined as, “an estimation of the expenses associated with purchasing, deploying, using, and retiring a product or piece of equipment. “ Let’s look at a school system deciding whether or not to upgrade to LED lighting. While the florescent lights the district is currently using has a lower starting price, LED lights may have a better value over an extended period of time. If the total cost of ownership shows an advantage of LED lights over florescent lights in the next 2-5 years, than the LED lights are most certainly the better choice. However, there are complicating factors, such as access to capital, alternative capital expenses, and the current economic situation of that particular school district that should also be considered.

A total cost of ownership analysis takes into consideration multiple factors including initial cost, product lifespan, energy cost to operate, frequency of maintenance, expense of product replacement, hours of operation, utility incentives, and how the product will be used. While this is the go-to method of gauging the value of energy efficiency projects, EPCO likes to take this analysis a step further. It is common practice to determine TCO by using industry standard figures for maintenance, repair and operation (MRO) expenses. EPCO has found this isn’t always the most accurate method for determining ROI in energy upgrades.

At EPCO, we believe interviewing the client and understanding their unique energy fingerprint, is the best method for understanding the true inputs and cost of operational expenses. Some businesses have energy expenses that are higher than the industry standards. For example, manufacturers that operate and run equipment more heavily during second shift will likely have a more unfavorable load profile than their counterparts producing mostly during first shift. This effects avoided cost values. EPCO will always review historical billing and consumption patterns to determine the true value of an energy efficiency project.

Although SB 310 led to the discontinuation of small commercial energy rebates throughout northern Ohio, larger businesses and school systems have the potential to capitalize on remaining incentives and tax credits for energy efficiency projects. One such example is receiving an exemption to costly utility fees and riders that appear on all electric consumer bills. EPCO has the expertise to identify, prepare, and submit exemption applications on behalf of clients. Most energy firms overlook this option, but it has added benefits for many large businesses and school districts.

Total cost of ownership is the standard way of determining the added value of energy efficiency projects. Though this analysis can give an accurate judgement of savings with projects, industry standards are not always the best indicator of true ROI. It is important to take an individualized, case-by-case approach, when evaluating energy efficiency projects. To learn more about how this could help your organization, email EPCO at info@energyplanners.com, or visit us at www.energyplanners.com

Ohio’s Ranking Drops on ACEEE Scorecard for Energy Efficiency

Every year, ACEEE (American Council for Energy-Efficient Economy) ranks states on their energy efficiency policy and program efforts and also provides recommendations for ways that states can improve their energy performance. The State Scorecard is a benchmark, which serves to encourage states to continue “strengthening their efficiency commitments as a pragmatic and effective strategy for promoting economic growth, securing environmental benefits, and increasing their communities’ resilience in the face of the uncertain costs and supplies of the energy resources on which they depend.” Last week, the 2015 State Scorecards were released and Ohio was ranked 27th. This is a drop from Ohio’s 2014 placement at 25th.

This drop in ranking is no surprise after Ohio became the first state to reverse energy efficiency and renewable fuel mandates in 2014. Ohio Governor John Kasich signed Senate Bill 310 in 2014, which froze annually-increasing energy mandates until the year 2017. At which point, the “the automatic levels are to be restored”, a provision that Kasich requested to be part of the legislation, according to The Plain Dealer (Cleveland). The bill also included language that establishes a legislative study committee tasked with evaluating the effectiveness and future of the original portfolio standards.

Senate Bill 310 counteracted Ohio Senate Bill 221, which was passed in 2008 and established the efficiency standard. Under Senate Bill 221, Ohio ranked #1 in the nation for advance energy and renewables, “bringing in more renewable energy facilities than any other state,” according to JobsOhio. Under the legislation, utilities can count improvements made by their own customers and also roll over any savings above a given target into the next year. Language in SB 310 created a provision that permits large industrial users to opt-out of utility offered programs; allowing these users to develop and institute internal programs. Concern has arisen that this may adversely impact the effectiveness of the utility offered programs; potentially increasing the cost and burden of compliance on smaller commercial entities.

Overall, the passage of SB 310 has negatively impacted the implementation of commercial energy efficiency retrofits throughout the First Energy territory. Unlike other state utilities, First Energy has opted to discontinue any rebates for energy efficiency work performed by its customers. As a result, there has been a decline in the number of small and mid-size commercial entities instituting energy efficiency related projects. This concern may persist beyond the current two-year freeze in place under SB 310.

Recently, the legislative study committee released a report recommending an indefinite freeze on the mandates. This has largely been met with criticism from environmental groups, politicians and industrial entities alike. In response, Governor Kasich stated that “a continued freeze of Ohio’s energy standards is unacceptable”. There is much debate still to take place before a final determination is made on the future of Ohio’s renewable and energy efficiency portfolio standards. EPCO will continue to provide additional review and analysis as more information becomes available.

EPCO Energy Infographic

Recently EPCO decided to evaluate the influence our team has had within the energy marketplace. We were curious to know what the economic and environmental impact has been from the projects we have facilitated over the past couple of years. To that end, we identified several key metrics from each projects portfolio, and put it into an infographic to share with prospective clients.

We were really pleased the results, and have opted to share it with the larger community. The numbers speak for themselves, but there are three metrics I would like to highlight.

  • $1.87 million in annual energy savings
  • Average project payback period is 0.96 years
  • Energy savings are the equivalent of more than 11.1 million pounds of coal burned

All Projects Infographic