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.

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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.

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The Time to Shop for Your Natural Gas is Now

It’s hard to believe, but the summer is slowly winding to a close. Even though days are still long and temperatures are high, now is when you want to start thinking about your natural gas contract.

Many businesses, non-profits, and residential consumers only consider their natural gas rate in few instances. It may be when winter arrives and the heat gets turned on or simply when your current contract expires. After all, for most, natural gas comprises a relatively small percentage of monthly expenses.

There is however a number of non-residential entities that pay a considerable amount for natural gas through the winter. This includes manufacturers, hospitals, schools, and even churches. In some cases, reducing rates by a matter of cents can add up to thousands in annual savings.

We have seen the adverse effect a cold winter can have on the budget. Just think back to the beginning of 2014 when the nation was overcome by the polar vortex. This of course was unexpected for most and hit many hard in the wallet.

Now though is the perfect time to negotiate your natural gas rate. Currently, gas reserves are up more than 5 percent over last year and prices have trended down these past 12-months. As we get closer to the winter season, the prices will go up. This is a function of supply and demand. Purchasing now enables you to capitalize on lower rates. If you signed a 12-month contract at a higher rate, renewing now will save you money during the following winter.

You have several options for exploring a natural gas contact. If you are a smaller consumer, there are programs through your utility and local brokers you can work with. Be sure to understand the terms of the contract offered and the fine print. Consult an energy advisor if you are unclear about any terms in the contract.

Additionally, most local chambers of commerce will offer their membership what is known as community aggregation programs. If you are not already part of your local chamber, you may want to consider exploring the many benefits they can offer.

If you are a larger consumer, spending perhaps $10,000 monthly on energy or more, there are additional options available to you. The market has become rather sophisticated with a number of products to select from. Though you may be experienced in managing your companies’ energy portfolio, it certainly would benefit you to explore options with your energy advisor to ensure you are making the most informed decision.

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Three Ways to Pay for Energy Efficiency

Recently, I shared with you the importance of crafting an energy plan to help guide your mission of becoming more energy efficient. Having a plan is great way to identify the opportunities in your facility and how best to prioritize your implementation schedule. However, knowing what you should retrofit and subsequently how you will pay for it, are two very different objectives.

In today’s economic climate, finding discretionary dollars to pay for energy efficiency upgrades is challenging to say the least. Typically, for most businesses, only a fraction of total operating expenses are energy related. Each fiscal year, when evaluating capital expenditures, energy projects tend to rank pretty low.

EPCO understands the financial concerns and restrictions our clients face. Part of our value proposition is to cultivate and leverage any and all incentive opportunities that exist in the market. Below are three essential and easy steps, to be packaged with your project, that will help lessen installation costs, increase project ROI, reduce payback periods, and amplify net savings.

Utility Procurement

Most consumers are content to simply sign a multi-year contract and never think about their utility bill again. This can be a costly mistake, especially for larger consumers. Negotiating a lower rate by even a few cents can yield significant value. In addition, it is very likely that at some point, now or in the future, an error on your bill will occur.

Think about the number of residential, commercial and industrial customers served by your utility.  Statistically, a mistake is bound to happen. Be sure to work with your energy advisor to review your billing history for any anomalies or incorrect charges. When billing errors are found, the money owed to you by your local utility can be reinvested into your energy project.

Rebates, Tax Credits, & Grants

Many utilities and state funded agencies offer a host of incentives, rebates, credits and grants to specifically help fund energy efficiency. Some of these opportunities do carry restrictions based on your industry, geography, or annual consumption. Other programs are publically available to all. The important point here, is to work with a professional energy advisor that is well versed on the available programs and application processes.

Traditional and Non-Traditional Financing

This is the most critical part of the implementation process. No longer are businesses relegated to merely two financing options; using one’s own capital or traditional lending institutions. Popping up around the country are these novel and creative alternative financing mechanisms. They leverage the net savings of your project and structure the loan terms as a service agreement. This allows you to fund the project with little to no money out of pocket and treat the payments as you would an operational expense.

In the end, the reduction you enjoy in operating expenses means more dollars toward increased productivity, better employee wages, and more revenue. The opportunities are certainly out there. Talk with your energy advisor today about how you can become more energy independent.

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What EPCO Can Do For You

As we approach summer, more and more businesses will begin to think about their energy consumption. In a just a couple of months, higher temperatures will bring increased electric consumption. Consumers will be cranking up their cooling load or increasing production. With increased consumption come increased energy costs. That is the bad news. The good news is that there are steps you can take to mitigate those rising operations expenses.

Energy Planners Company (EPCO) is a full service energy solutions firm committed to providing the best products and services available to our clients and partners. Leveraging our proprietary approach to energy management, EPCO will work alongside our clients to create a long-lasting advanced strategic plan to address all their current and future energy related needs. EPCO’s carefully designed methods and portfolio will help your business realize savings in areas you may not have known existed.

Electric & Natural Gas Utility Bill Review

For each metered account, EPCO will review all supply side charges related to the acquisition of, and costs associated with, electric and gas procurement.

ASHRAE Levels 1, 2, & 3 Assessments & Design

ASHRAE level energy audit & lighting assessments determine where, when, why and how energy is used in a facility. The main outcome of our customized energy audits is a list of recommended energy efficiency measures (EEMs), associated energy savings projections, and a calculation of whether EEM installation costs are a good financial investment for your facility.

Rebates, Incentives & Financing

EPCO specializes in creative and alternative financing mechanisms. Our team of professionals will leverage the energy efficiency projects you perform to exempt your facility from costly utility fees or apply for rebates through either your local or regional utility.

Long-term Energy Planning & Strategy

EPCO takes a holistic look at an entire building or campus to choose the appropriate approach to create cascading savings and improve asset value. EPCO will help design a clear and customized business case for a deep energy retrofit through quantifiable savings and empirical research.

Project Management & Implementation

From project identification, to design, and ultimately installation; EPCO can manage and facilitate the entire retrofit process for your facility. EPCO works with all energy intensive industries and consumers and understands the complexities of retrofitting a facility such as yours. Areas of project management expertise for EPCO include, but are not limited to, the following.

  • Lighting
  • HVAC
  • Motors, Drives, & Controls
  • Roof Top Units (RTUs)
  • Air Handling Units (AHUs)
  • Combined Heat & Power (CHP)

EPCO prides itself in its ability to cultivate unique and customized solutions for each client it works with.

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