Jack Gornik jgornik@trane

Understanding Energy Costs A presentation to theInternational Facility Managers Association Jack Gornik jgornik@trane.com

Energy Costs are Going Up 2

Deregulation

But deregulation also means competition. …and some complexity.

Pennsylvania Legislation “The Governor hailed approval of House Bill 2200 …... The bill will require electric companies to reduce electricity consumption - particularly at times of peak demand when electricity rates are highest. Electric utilities that fail to meet the law's requirements would face steep financial penalties. The legislation also will require every home and business in the state to be equipped with "smart meters" over the next 15 years. A smart meter gives consumers the power to better control their energy consumption, enabling them to use energy when it is cheapest and reducing use at times when it is most expensive. In addition, electric utilities will be required to offer customers new pricing plans that would reward customers who shift their demand to off-peak hours. The legislation also gives utilities the tools they need to purchase sources of energy at the lowest possible price. Existing law restricts the ability of utilities to use the full power of the free market to purchase energy at the lowest possible price for consumers. “ CBS MarketWatch, October 8th, 2008)

In January 2010 deregulation takes effect for most utilities in Pennsylvania. That will still make electricity the biggest bargain on the planet.

The Low Cost of Electricity • Cost of energy (via rocket fuel) of putting one ton in low Earth orbit: • $8 to $13 million dollars • Cost of generating the same amount of work using electricity at 10 cents per kWH: • $1,579 • What a deal!!

So what does a kilowatt cost? What will a 2010 kilowatt cost? It depends which kilowatt.

Summer Peak Day Load Profile Residential A/C Commercial A/C Commercial Lighting All other commercial, residential, industrial 6 a.m. 12 noon 6 p.m.

Summer Peak Day Load Profile 6 a.m. 12 noon 6 p.m.

Summer Peak Day Load Profile Residential A/C Commercial A/C Commercial Lighting All other commercial, residential, industrial 6 a.m. 12 noon 6 p.m.

USA Utility load factors EPRI data

Peak Load 2000 kW Avg. Load 1050 kW Total kWh = 28,000/day (Load Factor = 53%) ASHRAE 90.1 Building Profile 6 am Noon 6 pm

Higher Load Factors Yield Lower Energy Bills The first law of electricity pricing: “Load Factor IS The Only Factor”

What’s your load factor? Load Factor = _____Total kWh____ Peak kW x 720 Hours

PECO

All very interesting, but how does all of this relate to my energy bills? It’s in there. Its just a little hard to see. Let’s take a look, and at the same time, answer the question, “What does a kilowatt cost?”

Let’s look at the bill. 6 am Noon 6 pm

Take-aways • Not all kWs are created equal • The rates are going up, but if I understand my facility I can minimize the impact • Energy bills are confusing, but in that confusion lies opportunity • The biggest challenge is truly understanding the competitive offerings that will abound • I gotta get my power factor down

Questions?

Jack Gornik jgornik@trane