For a company in a manufacturing or other energy-intensive industries, one of the largest ongoing costs is power generation. Heating, lighting, cooling and powering the equipment on the factory line, or a bank of servers and computers, can be very expensive on a monthly and annual basis.
And with the uptick in oil, natural gas and electricity prices during the past two years, U.S. companies struggle to rein in their power costs. It’s one thing to pay high energy prices when your competitors are from the United States — they’re likely paying more for power today than they did in the past, too.
But in an increasingly global marketplace, U.S. companies have to measure their cost and overall performance against other firms around the world, not just in their own region or state.
Many companies work closely with their utility providers to cut costs in a variety of ways, from incentives to agreeing to use less electricity during periods of peak demand.
“I find that manufacturing customers are very concerned about the price of energy — all energy,” said Jon Kubler, director of pricing and power rates for Georgia Power. “Because of international competition, margins are small and small changes in energy have a big impact on profits.”
Most utility companies actively work with their industrial companies to control power usage and cost. After all, if the company is profitable and growing in its current location, it will be a long-term customer for the utility and part of the surrounding community, rather than being forced to move to another location to compete on cost.
Multiple Facilities, One Lower Price
One course of action some companies are considering is utility aggregation. While aggregation has various meanings in the utility context, for this discussion we will define it as the process of companies leveraging the power consumption of multiple facilities to obtain a lower rate.
This combining, or aggregating, can take different forms. Some companies that use an unusually high amount of electricity (25 to 50 megawatts) may be able to negotiate lower rates on their own. Georgia Power, for example, offers companies an option called MLM TOU (Multiple Load Management/Time of Use).
“It allows customers that have multiple locations to use their meter readings to determine their peak load contribution to the total peak,” Kubler said. “That rate is used to determine their billing demand. This rate is for customers who have an actual demand of 1,000 kW (kilowatt) or greater.”
One factor in the increase of pricing options for industrial utility customers is the spread of deregulation. While states are in various stages of deregulation of their utility systems, innovative pricing choices have arisen in some instances.
Some companies save money by teaming with other customers in an aggregation. This means that they can purchase power at a lower bulk rate than they could have by themselves. Often, businesses can work with local government agencies, area business organizations or trade and professional organizations to affect lower prices for their members.
In the Cleveland metro, COSE (Council of Smaller Enterprises), the small business division of the Greater Cleveland Partnership, operates an energy program that saves its members up to as much as 20 percent on their energy bills.
According to COSE, more than 700 Cleveland-area businesses have participated in the program since 2001, with an annual savings of more than $1 million annually on electricity costs.
What’s the Catch?
The evidence exists that electric load aggregation is an effective way of lowering your power costs. So why isn’t everyone doing this?
For starters, it can be time-consuming and difficult to set up. If your own company’s electric load isn’t big enough to leverage lower prices with the utility company, then finding appropriate aggregation partners is the biggest obstacle.
Two of the best places to start are your local utility company and economic development organization. Other options include hiring an independent energy consultant.
The local utility can help you in analyzing your energy needs, including load data, ways to conserve energy and pricing options. The larger your electric bill, the more time you should invest trying to lower your costs.
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