The Energy Marketplace

By Bell, John | Journal of Property Management, January/February 2001 | Go to article overview

The Energy Marketplace

Bell, John, Journal of Property Management

Deregulation of electric utilities is changing the energy management landscape for commercial property owners and managers by creating a new set of priorities in order to realize maximum savings and operational efficiencies.

While deregulation is not yet an across the board presence in this country, aproximately one fourth of the states are currently in some stage of deregulation and more are expected to join. It's a growing trend whose time has come, say energy industry sources.

The reasons for these changes are numerous, but most have to do with the fact that the electricity industry has been one of the last recognized monopolies in the world today. There has been a business theme for many years, moving companies away from monopoly structures towards competition. The changes in long distance phone service, airline travel, wholesale natural gas and trucking are just a few examples of this shift in national philosophy.

In addition, many states have seen the level of power generation fall increasingly behind demand for new power sources. Deregulation is being advocated by major trade and development sources and is seen as a spur for construction of needed new generation and transmission facilities, according to Dan Hack, marketing manager of the end user sector, Schlumberger Resource Management Services, Inc., Norcross, Georgia, management services providers for utilities.

Sharon Bauer, national account manager for St. Petersburg, Florida-based Florida Power Corporation, comments, "People like the concept of having a choice over who provides them products and services. Historically, we as consumers have not had the chance to select or have an opinion in who provides us power.

"The real question is, will deregulation improve the overall reliability and reduce the costs associated with providing service? As of yet, it's too early to determine what benefits we as consumers will actually receive," she continues.

Proponents of deregulation argue that competition among power vendors and energy service providers will drive down energy costs and improve service. However, that remains to be seen because the industry is only in the early stages of deregulation.

In a deregulated open market, vendors do not band together in power groups because that would be collusion. But Bauer also points out that, "We are seeing more competition and fewer producers in the wake of mergers and acquisitions."

Whatever the case, commercial property owners and managers, like sailors in uncharted waters, need strong navigational tools to keep themselves on course in a deregulated environment.

Become Educated on Deregulation

Hack advocates a four-step plan. The first and most important step is to become educated on the issues surrounding deregulation, even where there's no deregulation taking place yet. Information can be obtained through energy industry conferences, energy Websites, vendor Websites, utility suppliers and energy equipment vendors.

Next, says Hack, you need a clear understanding of your business model and its mission. "This may vary widely," he notes. "In the case of an office building, are you going to build energy costs into lease rates or use technology to allocate exact energy costs to tenants? Does the management company want to realize profit on energy or realize profit in other areas and make energy just a pass-through cost?"

Third, Hack advises the establishment of an energy strategy coherent with your overall business strategy.

Finally, users should set specific energy-related goals that are realistic and measurable. This will allow the user to track energy usage and compare usage to the goals set forth.

Jim Josephson, director of strategic business for Duke Solutions, a subsidiary of Duke Energy, Charlotte, NC says, "The question isn't whether to respond but how. Deregulation has created a huge market for energy companies which offer services ranging from supply management to comprehensive, integrated solutions involving a company's entire energy infrastructure.

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The Energy Marketplace


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