Energy Management Outsourcing Can Save Dollars: Maintaining expertise on staff can be an expensive proposition.(Brief Article)

Crescent Real Estate Equities had an energy problem. The real estate investment trust's energy costs were climbing significantly and future costs were unpredictable. To solve the problem, Crescent signed a five-year master utility management services agreement with TXU Energy Services in 2000. The deal provides utility management and consolidated billing services for Crescent's approximately 90 office buildings, hotels, and other commercial properties located primarily in the Southwest and Southeast United States.

Facing similar concerns about energy costs, the Quaker Oats Company, a major food products manufacturer, was challenged to reduce its energy costs in its 17 facilities located in 11 states and Canada. Quaker decided that its goals could best be accomplished through the outsourcing of its energy management functions. Quaker contacted a number of pre-qualified companies, conducted an RFP process to select the best qualified energy management service provider in light of the company's goals, and negotiated and executed a detailed energy management agreement with Enron Energy Services. The deal guaranteed Quaker a substantial savings in its annual energy costs over its 10-year term.

Similarly, CarrAmerica Realty Corporation entered into a three-year master energy services agreement with DukeSolutions, Inc. in 1999. The agreement covers all of CarrAmerica's office buildings (approximately 326) in the United States. The services provided by DukeSolutions under the agreement include energy information and billing administration services, energy supply management, metering services, transitional energy services, and efficiency services. The agreement also contemplates the potential monetization of certain energy-related assets owned by CarrAmerica.

Whether the business is managing real estate investments or making great oatmeal, energy costs increasingly are becoming a drain on the bottom line. Some recent surveys have demonstrated the scope of the nation's energy problem:

* Power outages cost the United States economy over $120 billion in 2000

* More than one-third of one survey's respondents have experienced significant losses from power outages

* More than half of such respondents believe self-generation of their power requirements is the best strategy for meeting their growing power needs.