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RSS FEEDS| Last updated: August 27, 2007 08:29am |
| Shopping For a Better Energy Strategy |
 Robbins |
And with the price of oil—a commodity that influences the price of natural gas, which fuels electric power—hitting historical highs, market volatility is causing spikes in electricity rates, and nipping at retailers’ profits.
The catch-22 is that retailers are too busy checking inventory, attending buyer conferences, staffing stores and meeting payroll to worry about how much they pay for electricity. Instead, they simply send invoices to their accounts payable department, and end up getting zapped by higher utility expenses.
The good news: Implementing strategic cost-saving tips can help chain operators turn down the heat on energy expenses, and reap cool savings on their monthly utility bills—savings they can then use to build staff, increase inventory, and improve operations.
Plan For the Next Budget
First, retailers should review what they’ve spent the past year on utilities before planning their next fiscal budget. This includes analyzing the chain’s historical data to see what’s been spent and where owners and operators can save. Auditing a year of utility bills can also identify any discrepancies in the invoices month to month.
A thorough examination might find that a site was charged $1,000 more one month, when compared to the other months of the audit. Such discrepancies are probably the utility’s mistake, meaning cash is owed to the retailer. On average, auditing and uncovering discrepancies saves retailers 0.5% to 1.5%.
Reviewing historical data can also determine whether the sites are on a proper retail rate, such as for 24-hour operation or fluctuating hours, rather than a multifamily or industrial building rate. Putting sites on the correct rate can save retail owners as much as 1% to 2% per site.
For best results, retail operators should consider working with an outside energy management consultant. These experts know what to look for and how to dial down energy use.
Bypass the Utility
Retailers with sites in regulated markets are tied to the rate the utility sets, which makes reviewing historical data the only option. But retailers with sites in deregulated markets have more ways to save, and can beat the utility by procuring electricity through a third-party supplier.
This means any chain operator with stores in Illinois, Texas, Maryland, Massachusetts, and New York—the five truly deregulated markets in the US—can pool their stores’ electricity loads to procure a bulk rate.
The savings can be as much as one cent per kilowatt. That doesn’t sound like a lot of money on the surface. But when multiplied over the number of kilowatts used during the month, and the number of stores in the group, the savings can be as high as 30%.
Capital Improvements Can Save
Supply-side savings is just one part of the equation. The other is demand-side, which means surveying store equipment, such as lighting, HVAC, energy-efficient windows, etc., to find savings opportunities.
To illustrate, retailers can use T8 lights instead of T12 lights, and upgrade to state-of-the-art HVAC systems to make sites energy-efficient. Retail owners can also install energy management systems (EMS) to control the building’s lighting and HVAC systems.
EMS systems are the best defense against wastefully using electricity, because they can automate when the lighting and HVAC systems start and end each day. For example, store managers can program HVAC systems to start at 6 a.m., phase-one lighting to start at 9 a.m., and full lighting to start at 10 a.m.
However, these systems only work as well as those who operate them. If an employee overrides a set point without reestablishing it, the system will continue to run at that rate, and drive up monthly costs.
Ultimately, these steps will make energy use more efficient, and find savings previously overlooked. And, as the energy market becomes more refined, and the people in it more educated, real cost-cutting opportunities emerge.
Indeed, with energy use rising every year, now is the time retail-store operators should heat up their awareness of the amount of energy their portfolio uses. It’s the best way to stay in front of an erratic market, and ride the wave to higher profits.
Mark Robbins is senior director of client relations for Cadence Network Inc. a utility, lease and telecom-expense management firm, headquartered in Cincinnati. Opinions are the author's own.
