Power Plays

By SmallBusinessComputing Staff | Posted September 01, 2001
by Tom Dinome

Maybe Mom and Dad did know what they were talking about when they kept hounding us to turn off the lights. Cutting costs is always sound business, and these days it pays to keep an eye on energy consumption. Experts have tried to explain the energy crisis in states like California and New York: Too few power plants, too much deregulation. But businesses just need to know what they can do to keep similar crunches from putting their companies out of commission.

Consumers and businesses went on a tech-buying binge during the past four years, and energy usage has risen accordingly -- 7.4 percent, reports the North American Electric Reliability Council, a not-for-profit company that promotes the reliability of electric systems in North America, and tracks energy supply and demand. In 1997, U.S. electricity usage for the year totaled 3,388,440,000 megawatt hours; 4 years later, usage rose to 3, 639, 061,000 megawatt hours.

Meanwhile, costs for many forms of energy, including electricity, oil, natural gas, and petroleum, have risen. The extent to which businesses have been affected varies based on their geographic region, industry, and individual power consumption. Some businesses have felt minimal effects; others have seen their energy costs rise by 25 or even 50 percent.

The restaurant industry has been one of the fields hit hard by the energy crisis. Restaurants can't really avoid using a lot of energy, especially at peak times of the day. Any energy savings would be easily offset by the lost lunch or dinner business. Gerry Houlihan, the owner of Daniel's Restaurant in Tuckahoe, N.Y., and president of the local chapter of the New York State Restaurant Association, estimates his energy costs will be $10,000 to $12,000 more this year than last year and that some restaurant owners in the Westchester area might see a 25 percent increase in their energy bills. Houlihan has put some conservation measures in place, such as changing to compact fluorescent lighting and spending $20,000 to install four forced-air heating and air-conditioning systems over the past two years, but he's not willing to raise prices, and he notes that many others aren't willing to either.

"Right now there's nothing you can do, except buy more efficient equipment," he says. "There's no secret to getting your energy costs down, except not being stupid and leaving your lights on all night long. This is a fact of life, and it's going to be around for a couple of years."

SUPPLY AND DEMAND

Northern California's infamous rolling blackouts, which began in late 2000, helped bring the energy issue to the front pages. Facing limited electricity supplies and increasing demand, the state decided to divide its northern section into 14 blocks, rotating outages among blocks at different times to ease the strain on an already stretched power supply.

Several factors have contributed to the problem, but one issue that has attracted much of the attention is utility deregulation. As of June 2001, 24 states, including California, had adopted some form of utility deregulation. The goal was to allow businesses and consumers to shop for their own utility service to get the best prices. In California, the energy market was restructured before energy supplies had time to catch up to a growing demand, and the result has been higher prices and even leaner supplies. Other states, like Pennsylvania, have managed the switch successfully, phasing deregulation in properly by taking into account a variety of legislative, economic, and marketplace factors.

"California is a notable example of deregulation that really wasn't carried out very well," says Jerry Lawson, director of the U.S. Environmental Protection Agency's ENERGY STAR for Small Business program. "Our view is that we ought to be paying the real price of energy, be it gasoline, electricity, or natural gas. And the real price will vary from market to market, depending on supply and demand and the cost of production." Scott Hauge is president of CAL Insurance, a 30-employee independent insurance agency based in San Francisco, the epicenter of the energy issue. Hauge's office has been the victim of northern California's rolling blackouts, and while his business hasn't suffered severely from the outages, he feels the disruption in his workflow is just as costly as any increased bill, damaged equipment, or lost information.

After one blackout, CAL Insurance's accounting and certificate-of-insurance systems went down, and employees spent two days working to get everything up and running again. Hauge estimates that the downtime cost him $3,000 to $4,000 in lost productivity. "To small businesses, the biggest impact is not the cost increase," he says. "It's the rolling blackouts that are really deadly. They shut you down. You've got labor sitting there doing nothing, and it can burn out your computers. We didn't lose any business: It was just an inconvenience."

At one point, Hauge explored buying a generator to use as a backup in case the lights go out for an extended period of time, but found the fuel costs to run the generator were too expensive. Hauge notes that the state has announced a notification period before the blackouts go into effect, which will alert businesses anywhere from a half-hour to an hour in advance. "At least you can shut off your systems or take some preventative steps," he says. "We'd like to have more, but at least it's something."

CUTTING COSTS BY CONSERVING

While businesses in California ponder how to keep the lights on, companies in the rest of the country are focusing their efforts on keeping their work environments comfortable without losing their shirts.

For Michael Axelrod, president and CEO of microMICR Corporation in Ft. Lauderdale, Fla., energy efficiency makes economical and environmental sense. The 16-employee company manufactures laser printer font devices and toner cartridges for Magnetic Ink Character Recognition (MICR) applications.

"Our main motivation for putting in energy-efficient measures was basically to produce a more comfortable working environment," Axelrod says. "We're in South Florida and it's pretty hot here. Our other motivation, and this may be more mine personally, but I feel environmentally conscious. I wanted to do what I could to be efficient and not waste energy. We're convinced that the payback in terms of energy costs comes somewhere three to four years down the road. In other words, we'll have saved enough in our monthly electric bills to pay for any additional costs."

Axelrod changed to efficient fluorescent bulbs, and while he has seen savings as a result, he actually missed out on the usage reduction incentives offered by his local power authority since the installation occurred before the incentive was in place and microMICR wasn't eligible after the fact.

The company also replaced three rooftop air-conditioning units with new high-efficiency units, controlled by seven-day programmable thermostats. "On weekends it's not cooling unnecessarily, and on weekdays it cools when we're here and automatically switches to less cooling when it's not needed," he says.

Other conservation measures at microMICR include increasing the fiberglass ceiling insulation, making sure all windows have tinted film and weather stripping, and placing a vinyl curtain over the external shipping door. The company has also placed all the lights on a master switch, so that when the office closes, it's certain that all lights are turned off. "There could be a little bit of savings that we're missing out on by not turning off lights in a room that might be temporarily out of use," he says, "but we don't think it's that significant. We're more conscientious about turning off [computer] monitors, since we know that the monitors continue to stay warm, generate heat, and use power."

ELECTRICITY ISN'T ALL

At Moore Buick Pontiac GMC Truck, a 70-employee dealership in Los Gatos, Calif., owner John Moore's business has been relatively immune to rising electricity bills. It's the increase in gas prices that he's watching carefully, since the dealership depends on natural gas in its body shop. As of April 2001, he was paying $1.25 per therm, compared to 63 cents per therm in April 2000, with the highest spike reaching $1.72 in January 2001.

Moore's dealership hasn't experienced any blackouts, but the area he lives in has. If blackouts were to occur, however, the effect on business would depend on the length of the outage. "We'd be able to work on cars in the shop," he says. "The problem is that if the electricity goes out, the air compressors stop working, so there's a limited supply of air for car lifts or air tools. The biggest headache, however, would be getting the computers back on line. Computer downtime would halt communications with the factory or order generation."

Despite rising costs, Moore has not raised prices. "It's so competitive that it's really difficult to raise prices arbitrarily without losing business," Moore says. "So we've just been trying to cut expenses instead."

The dealership's efforts have included lowering thermostats, changing to compact fluorescent lighting, changing time clocks to turn off security lighting earlier, shutting off most interior lights during the day, and installing electronic thermostats on heaters that previously were manually operated. "I've probably cut back half the time that I have the outdoor display lighting on at night," he adds. "Everything is off pretty much at midnight. We haven't had any vandalism problems, and hopefully we won't because there is a security issue involved."

ENERGY GUZZLERS

Some industries are forced to deal with the energy issue more directly than others simply because their power consumption is greater. Manufacturing facilities and factories need to operate several shifts, sometimes round-the-clock, in order to meet production requirements. Restaurants like Daniel's don't have the luxury of shutting down during peak usage times. These types of industries have to watch their usage extra carefully.

Houlihan notes one energy area that restaurant operators are watching is their peak load or peak demand, which is the highest level of consumption in a specific time period, and a big contributor to higher bills. Houlihan notes that some restaurant owners are working on ways to keep their peak load down by putting timers on their compressors, which power energy-heavy equipment like refrigerators, so they don't all come on at the same time. "In the past, you'd have the compressors click off at 2:00 in the morning and back on at 5:00 in the morning," he says. "Now they're staggering them."

In the spring Houlihan's restaurant was host to a meeting conducted by the restaurant association and Con Edison to review cost savings, consider ways to reduce demand load, and discuss how to install efficient equipment. He firmly believes in sharing the severity of the situation with his staff. "When you tell them your Con Ed bill is $4,000 a month," he says, "they look at you and say, 'yeah, right.' Then I bring it upstairs and show it to them! I think it's going to be an interesting year for restaurant owners. Those who know their numbers and watch them carefully will be O.K. Those who just go by the seat of their pants and don't look at their numbers every month are going to be surprised."

STEPS TO TAKE NOW

The cost of energy isn't the only problem facing businesses today. In fact, energy can be considered just one hot spot in an overall troubled economy. Prices for materials and other operating expenses are also rising. But while businesses may not be able to do much about their other costs, there is quite a bit they can do to keep energy bills down.

One solution is to retrofit existing equipment by installing more energy-efficient power sources. Restaurants, factories, industrial plants, and other heavy power users are a different story, but for most general office environments, lighting, heating, and air conditioning represent the majority of the energy expenditures. Most businesses use fluorescent lighting, and the standard is the T-12 four-foot, inch-and-a-half diameter bulb. By changing to compact fluorescents, such as T-8 one-inch diameter bulbs, an office can cut its use in half, without sacrificing the amount of light emitted. Businesses should also look at their type of ballast (the source of current for the bulb). Electronic ballasts are more efficient than older, magnetic ones. There are compact versions of incandescent (screw-in) bulbs, which can also offer big savings.

The costs for upgrades vary depending on a business' size and its usage of lighting or air conditioning, but the average payback time to recoup investments is in the neighborhood of three years. Many utilities also offer rebates and other incentives based on how much a business can reduce its energy usage. Owners should check with their local supplier for more information.

"The energy savings that you will accrue will pay for your investment, usually in less than three years," says Rich Girolami, director of consulting services for PSEG Energy Technologies in Edison, N.J. "If you've got an operation that runs for long hours, maybe a two-shift or even a round-the-clock operation, you might pay back that investment in less than a year. The more hours your lighting operates, the greater the kilowatt hour savings -- meaning lower utility bills -- and the faster your payback will be on your investment in the more efficient system."

Conserving energy and becoming more power-efficient is mainly a matter of taking a good, long look at the energy sources currently in place, knowing how much can be spent on upgrades and, most importantly, getting all the information that's out there before getting started. In other words, being left in the dark can pull the plug on profits.

The Real Culprit

MUCH OF THE energy focus is on lighting and air conditioning and ways to make it more efficient, but how much energy is your computer using? More than you might think, according to Andrew Fanara, product development manager for the EPA's ENERGY STAR program.

He notes that in a typical desktop computer system, the monitor consumes the bulk of the energy, with the average power consumption for a 17-inch monitor ranging from 85 to 125 watts. In comparison, a flat-panel or LCD monitor might consume much less energy, around 30 or 40 watts. The CPU can consume around 30 to 50 watts, "depending on how many additional gadgets you have on it," Fanara says. "If it's loaded up as a multimedia PC, it's going to consume a bit more. Each of those devices consumes a few watts here and there."

To determine the full energy impact of computer equipment in office buildings, Fanara adds that it's important to consider the full range of peripherals and accessories that people use to get their work done, including speakers, scanners, printers, copiers, and even servers.

"Servers throw off a lot of heat because they are on 24 hours a day," Fanara says. "They're constantly cranking. Keeping servers cool and ridding a building of the heat they produce can have a big impact on a company's energy bill and the comfort of workers. It's not unusual to see portable air-conditioning systems for server rooms. And mainframes should not be forgotten. They're also a large source of energy consumption for a commercial building that has one. When you add it all up, it can really impact a company's bottom line."

Taking Action

THERE ARE SEVERAL federal and state programs targeted to small businesses and energy conservation and efficiency issues, and many business owners have also gotten personally involved, organizing energy-focused programs or rallying local associations to work with government.

Scott Hauge, president of CAL Insurance, has developed a small business-focused energy program, offering information about conservation, incentives for usage reduction, and assistance with retrofitting projects. Working with the Small Business Administration, the city of San Francisco, and several local and state business associations and community organizations, Hauge's program is ambitious but seems to be on the right track.

"It's a combination outreach to small businesses and residents, although I'm focusing on the small business piece," Hauge says. "My goal is to provide information about what small businesses can do either to reduce their energy usage at no cost or to use the rebate programs that are available right now for lighting and heating."

To lower retrofitting costs for many small businesses, Hauge's program is focused on having businesses and residents join forces to increase their purchasing power -- and their appeal to contractors. "If you need a retrofit job that's relatively small, you can't get a whole lot of interest from contractors. The idea is that if we can aggregate purchasing, then that would make more contractors interested," he says, adding that the goal is also to find, qualify, and train contractors in energy efficiency and conservation, as well as to find contractors that are working with small businesses and make sure they are up to speed on the latest energy conservation measures.

The program is also working with appliance stores in San Francisco to do additional promotion and education about what's available from the state as far as energy-efficient products. Another component educates retailers, who tend to use a lot of incandescent lighting.

"We've got to figure out ways to get information out to people," Hauge says. "We're going to get a lot of help when the energy rates go up; people won't have a choice. We've got to break down bad habits that have occurred in the past if we're going to have any hope of preventing blackouts."

For more information on this small business energy program, go to www.sfsba.org, or contact Scott Hauge at 415-680-2109.

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