A question many energy management service providers ask is: "Why do organizations wear blindfolds when targeting energy cost reductions?" Organizations often spend thousands and sometimes millions of dollars per year on energy and are making decisions with limited knowledge or understanding about how and when they use energy. Even more wonder how they are being billed for it. If you fall into one or more of these categories don't worry, you're definitely not alone.

Over the years I've had many discussions with organizations, I am always amazed (even though I shouldn't be by this point) that 95% of the companies have no idea how much they spend annually on energy (gas, electricity) or water, let alone understand how their bill is calculated.  If you don't know how your bill is calculated (demand charges, energy consumption, distribution costs, transportation costs, balancing charges, credits, penalties, etc) how do you know what to focus on when trying to control this expenditure? This phenomenon is common regardless of the size of the company, industry sector or contact position held within the organization.

Most utility or supplier bills are received by accounts payable whose sole responsibility is to make sure the bills are paid and recorded. Interestingly enough there are many occasions when the bills are not paid in a timely fashion resulting in a late charge amounting to another 5% to 8%. True, monthly utility bills can be confusing; however, they are filled with valuable information once fully understood. The information can be mined in a timely fashion and shared with various departments that are accountable for energy in an effort to drive conservation activity throughout the company.

It's common practice for organizations to not account for energy as a separate line item on their monthly internal financial statements. In the past it was not viewed as appropriate but now that energy costs are higher and increasingly volatile, companies should be tracking energy costs on a monthly basis. They should compare the figures against a monthly budget noting any variances to drive each department to action regarding procurement or energy usage practices.

By now, everyone has likely heard how smart meters will be installed at our homes in the next few years. Actually, interval (smart) meters have already been installed in many forward-thinking utility jurisdictions and at industrial facilities. Smart meters do not make smart people and most people within a company are not aware that this information is captured and readily available.  The energy reporting (load profile) from the main service meter can help pinpoint waste and verify what is being used on a monthly, weekly, daily and or even on a per shift basis. Understanding and using this information on its own can identify at least 5% in savings.

It amazes me how much energy management is segregated into mysterious silos. Pricing and energy costs are the responsibility of the purchasing/finance department (the first silo). Typically, this group does not have a true understanding of facility usage and does not receive timely information if a usage variance exists.

The second silo consists of engineering or maintenance which, historically, has only been responsible for energy usage. This group has limited exposure or understanding on market pricing fluctuations and volatility. How can you determine whether to go ahead with plant modifications if you do not have access to timely pricing signals in your evaluation? For example, the Independent Electricity System Operator's (IESO/ISO's) in many electrical jurisdictions provide timely spot market pricing to help customers, yet many are not aware of or fully utilize this information.

Recently, leading utilities and government agencies have focused on promoting energy monitoring, targeting and reporting. This concept promotes installing sub-metering and comparing consumption to specific energy drivers such as production or weather. This has proven to be difficult for organizations to promote and sell internally because of the investment capital, time and expertise required to set it up and operate effectively. However, it is a worthy exercise for advanced companies that are committed to energy reduction and strive to be proactive in energy management. These companies only represent 1% to 5% of the large user population.

The essence of energy management involves taking the blindfold off, and allowing all of your staff to see energy as a controllable, operating expense. Without this, energy reduction programs will endure difficult times ahead.