The
fully bundled ESCO approach
For convenience,
there is value to be enjoyed by the one-stop-shop method of dealing
with the large energy services companies (ESCOs). These companies
will handle essentially all aspects of your energy program, and
keep you free to operate your core business. The price of this
though, is to shift the majority of the benefit to the services
firm or, in other words, to leave money on the table.
Unbundling
is the key to maximize the value (to you) that can be enjoyed
from the new era of energy deregulation. This is implicit in that
what the government has been doing is unbundling, while the energy
services companies have been quick to attempt to rebundle the
discrete components. Unbundling though does require a level of
attention and expertise not typically found in a property management
group, and the consequences of possibly lesser performance can
be significant. Also, the strategy for every company must be different
to assure the benefits are aligned with the specific company goals.
Our
Approach
With direct experience at the leading energy services firm in
the country, as well as two decades of commercial real estate
practice, FRASER LIMITED is uniquely poised to craft the
appropriate strategy and detailed program for your comprehensive
energy services approach. We can also handle, to any level of
participation, the implementation of your program. Our services
include without limitation the following:
These basic
frameworks of services are meant as illustrative only, each firm
will require a custom and flexible service package to most exactly
meet its needs.
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Existing
and Future Sites
Clients often have an aggressive expansion program underway with
new properties being constructed in locations both domestic and
foreign. Heavy energy consumers, these properties pose an opportunity
to enjoy savings from reduced electricity costs whether through
deregulation, negotiation or other means. Such discounts will
make the properties operate less expensively, and help maintain
them as competitive in regard to their lease status with clients.
Electricity is typically the single largest line item of operating
expense, and is also the most fragile service of a utility nature.
Contracts may be had that provide for discounted and more reliable
energy. The best time to negotiate these terms are when a property
does not yet exist, but is in the planning stage. Consequently
the primary focus for clients should be on expansion locations.
Discounts vary and have been seen from 1% to 25% depending upon
location and the usage of the property.
Clients may
also have many existing sites, again both foreign and domestic.
Certain of these may be in locations where discounted energy is
worthy of consideration due to the high cost of local electricity.
Virtually any location may be subject to discount through various
approaches such as utility negotiation; however it is prudent
to create filters and prioritize which sights may return the maximum
value. Such filters include areas with higher than average electric
costs (California as example), open retail access or deregulation
(again California and seventeen other states), and strong regional
energy service providers. Other filters and criteria may also
apply. In some circumstances an aggregation of these sites, or
select from them, may be appropriate. Presently there is an immanent
sunset on discounts in three states and these states should be
prioritized to avoid missing the window of opportunity. Other
existing locations can follow on a less aggressive pace as prudent
following review.
The obtaining
and implementation of energy programs for proposed and existing
properties essentially is the same scope of work in terms of goals;
the work processes and effort are different for existing than
for proposed sites. The deliverable in both instances is the executed
contract or other document allowing for the most beneficial energy
source/services program possible for each site. A degree of discussion
with appropriate client personnel will be required to become acquainted
with long term strategies and goals, and so allow the pursuit
of complimenting energy deals.
These energy
deals take many forms from simple discounted commodity, to complex
full-outsource Operations and Maintenance contracts. It is possible
to shift construction cost burdens to energy service providers
wherein they will provide all energy related infrastructure in
exchange for a multi-year energy contract. It is possible to obtain
guaranteed locks on either the energy budgets or the entire O&M
budget. It is possible to acquire either a significant up-front
cash benefit, or an on-going lesser annual cash benefit. And a
wide range of other structure scenarios exist. Part of the deliverable
will be the exploration, understanding, and crafting of the particular
type strategy best suited for the client's strategic business
plan. It must be noted that no one strategy will apply to all
properties, and multiple service providers will be involved just
as there are now multiple utility companies involved.
The
Master Plan
An
overall, or global, energy approach plan for the entire portfolio
should be considered. This plan would detail by location, and
by measure, the ongoing strategy of the client in its pursuit
of value through energy services. Included would be commodity
acquisition, infrastructure improvements, power quality, generation
(on-site), financing, contract structures, outsourcing scenarios
and the full range of possible deal structures. This would take
the form of a step by step plan easily implemented by the client
in-house or with third party assistance. Such a plan would become
part of the strategic process when going to a new location and
beginning to establish a new property. It would aid in the mechanical/electrical
design, contractor selection, cost allocations, and operating
expenses. This plan would also be applicable to existing sites
that have not been converted to the company’s energy program,
and would be ongoing in nature to accommodate the eventuality
of capital improvements.
This comprehensive
plan could be crafted in advance of any site-specific work as
detailed above, and then be applied by clients as the template
for all properties. In this case it would provide clients the
greatest degree of autonomy in dealing with energy issues, and
possibly be the only service required of FRASER LIMITED.
However, due to client resource constraints, and the immediate
need for action at many locations, it seems appropriate to pursue
energy benefits in the order submitted. In this fashion the comprehensive
plan will be modeled after the successful actions and negotiations
enjoyed at various locations, and will be far more directly applicable
with less staff in the end.
The portfolio-wide
energy program is a work-tool document with step by step processes
and procedures applicable to every property, and addressing all
of the varied elements of deregulated energy services from billing,
to commodity, to infrastructure improvements. This plan will be
created around the expressed goals and internal processes of the
client to best blend with the culture and business needs of the
company. While it may be the case that clients have not developed
plans for construction beyond the next year or two, it is the
case that energy deals will expire, infrastructure capital projects
will be required, deregulation status will change, and other related
components of energy services will continue to evolve. Given this
dynamic it is wise to possess a comprehensive program to remain
proactive and retain maximum benefits.
Efficient
Contracting
The ideal process will be to engage FRASER LIMITED for
all three scopes of work concurrently. In this fashion we will
minimize fees, and optimize the three processes. For example,
utility billing services are an important part of reducing internal
overhead costs, as well as understanding energy usage on a per-site
and global basis. Billing services would typically be addressed
in Phase Three - the global program, but if concurrently engaged
will be incorporated into Phases One and Two as part of all energy
deals.
Likewise,
by engaging for essentially all properties concurrently it will
be possible to spend less time with certain vendors and work toward
larger contracts with greater aggregated benefits. We will also
be able to attract the attention of those larger players who may
otherwise have little interest in the relatively small size of
certain properties.
