Improved Bottom Lines
Savvy pursuit of competitive energy bids can bring immediate energy savings.
By Dr. Jack Mason
Typically, day-to-day operational issues relating to municipal and state budget pressures, security, general facilities management and staffing get the lion’s share of any correctional facilities manager's attention. Yet, in most cases, correctional facilities managers interested in reducing operating costs can achieve immediate savings by buying natural gas and electricity at a lower cost via a competitive bid scenario.
The benefits of competitive energy bids are obvious. Publicly run correctional facilities can save taxpayer dollars. Private contractors running correctional facilities can improve margins and profitability without sacrificing any standards in security and living conditions.
Historical data indicates that energy costs are one of the top five expenses for most large businesses. To date, many correctional facilities and energy managers have not pursued competitive energy bids because, done manually, they are incredibly complex and time-consuming. However, thanks to a variety of technology tools, such as online auction technology, it takes remarkably little time and money to seek out competitive energy bids, and lock in lower energy prices.
To pursue competitive energy bids, some key activities should be implemented. These can require minimal investment in time or money if the process is automated via technology. In addition, facilities that lock in lower prices for natural gas and electricity can begin to see savings almost immediately. The following are highlights of how correctional facilities managers can pursue competitive energy bids.
Step 1: Match the markets where competitive natural gas and electricity bids are available with facilities operating in those areas. Information on deregulated markets is available through the Energy Information Agency of the U.S. Department of Energy. (Start at www.eia.gov and www.eia.doe.gov/oil_gas/natural_gas/restructure/restructure.html .) or via the EnergyWindow Web.
Step 2: Gather energy usage data for “priority” facilities in competitive markets. To provide a quote, energy suppliers will require very specific information on energy usage, peak loads and more. Gather this information manually, or rely on third-party energy companies that are experts at gathering this data.
Step 3: Balance risk tolerance with potential savings opportunities. Energy contracts can and should be viewed a lot like an investment portfolio. The goal is to maximize performance and minimize risk through diversification. So find a balance between cost savings and cost predictability. For example, if your budget is locked in stone, then it's not wise to choose a variable rate contract to save money in the short term. Variables that affect risk include suppliers, geography, regulated vs. deregulated markets, price magnitude and volatility. To save research time in this step, consider energy management firms or energy consultants who already have that information, on a market-by-market basis.
Step 4: Take advantage of fast-breaking opportunities. Sometimes, great energy deals appear out of nowhere. And they can expire just as quickly as a result of regulatory changes, seasonal changes and more. Miss these opportunities and, often, it will be another year before they can be pursued again.
Step 5: Use an online procurement system to automate the request-for-bid process. Online auction engines can reduce the amount of time to pursue a competitive energy bid from weeks of research to several hours, and the whole request/bid and analysis process is automated – based on pre-set criteria.
With the tremendous amount of dollars that can be saved, correctional facilities managers would be wise to seek out competitive energy bids as an immediate way to reduce operating costs and minimize the potential for long-term budget “creep” as energy costs continue to escalate.
Dr. Jack Mason is president and co-founder of EnergyWindow Inc.