A Dollars-and-Sense Approach to Managing Utility Resources.(Siemens Building Tecnologies Inc. Energy Consulting Services Div.'s cost management function (URM))(Statistical Data Included)

Keeping abreast of utilities is more important than ever

Sooner or later, electric utility deregulation forces every organization to choose an energy provider, just as consumers had to choose a long-distance telephone service when the telecom industry deregulated. Energy managers who can combine both the supply-side and the demand-side expertise to manage volatile energy prices--the deregulated portion of the energy bill--and can go to bat for an organization in the totally new energy marketplace will be in demand.

Energy procurement is never a one-time deal. Energy procurement must be carefully and continually managed for each type of utility, whether it's electricity, natural or LP gas, oil, or steam.

Managing electric utility resources is an exceptional challenge, primarily because the knowledge needed in mastering the new field was not taught in engineering and technical schools where most of today's energy professionals were educated. An organization can still realize the full potential of its negotiated energy procurement savings by establishing its own utility cost management program, or URM, function. The idea for this function originated with Siemens Building Technologies, Inc. In this way the organization may act as its own utility resource manager.

The URM function should help an organization achieve savings that are higher than market returns for similar organizations with no utility manager. Establishing the function is a critical step in guiding the organization successfully through deregulation. In addition, URM helps management focus on building critical supply-side competencies rather than relying only on existing demand-side skills for energy conservation and energy management.

Most companies lack sufficient supply-side expertise because many energy managers grew up learning about the demand side. Since they are required to deal with deregulation, ESPs, and the local distribution utility companies, energy managers need to have operational knowledge of local deregulation rules, local utility rates, and reputable and available ESPs for the local market. They must also understand how energy marketers price their energy in order to be a viable player to competitively procure energy in the future. There are no federal or state rules in standardized energy contracts to protect commercial users. All these factors put the energy manager at a disadvantage compared to ESPs, which negotiate energy contracts as a course of business.

To establish the URM, organizations need to develop and nurture both competencies--which seldom coexist--and they need to balance and integrate the supply- and demand-sides to enable the organization to effectively analyze past energy profiles, present operations, and future energy needs. Equally important, all of the critical disciplines of this new URM function must be mastered, otherwise any initial energy procurement savings may be at risk in a very short period of time.