Outsourcing isn't Always In with End Users
Significant savings are increasingly hard to come by for large,
multi-facility energy users even when using outside energy experts
in the face of volatile commodity markets and increasing pressures
inside their companies to show significant returns on investments,
according to panelists yesterday discussing energy management
outsourcing Monday at GasMart/Power '99 in Dallas.
Industrial customers need to push down the energy
decision-making in their organizations in this more competitive
energy world in which hour-by-hour and minute-by-minute decisions
need to be made in terms of commodity buying, said Terry Cowan,
vice president for energy procurement and management at Brubaker
& Associates, Inc., a Plano, TX-based energy consulting firm.
Among the issues facing industrial customers seeking energy
management help, the "objectivity" of energy service firms becomes
a major consideration, Cowan said. "We specifically do not own or
sell any commodity. We only sell services. If a company wants us to
buy their energy, we open it up to the whole field out there.
"The news media emphasize the big guys who participate on both
sides. I find it difficult to believe they can participate in an
PG&E Energy Services, a non-utility affiliate to giant San
Francisco-based Pacific Gas and Electric Co., avoids these
potential conflicts by concentrating on overall energy savings
results rather than the specific products used to achieve the
savings, said Paul DeMartini, vice president of integrated services
at PG&E Energy Services. DeMartini emphasized that savings are
somewhat illusory for commodity buying alone due to continued price
volatility for gas and electricity.
"We try to structure our alliances (contracts) in a way that
doesn't put us in a position of having to force our particular
commodity product on a particular market. We'll put our competitive
product on the table, but if it doesn't work, our reward isn't tied
to the specific product. We're not tied to selling specific
kilowatts or therms, we're tied to delivering value to customers."
Jay Rooney, an energy manager for 100 manufacturing facilities
owned by Armstrong World Industries, said he thinks there is a real
problem when energy service providers are tied to suppliers. Rooney
said he doesn't necessarily not do business with these affiliates,
but he examines on a facility-by-facility basis whether he needs a
"Are they going to give you truly creative solutions?" he asked.
"We look at it on a site-by-site basis."
In general, Rooney said, energy consultants tend to provide
"average results," but Armstrong continues to hire a variety of
them for specific projects at specific plants. They are helpful, he
says, but to "really push the envelope," his firm depends on
internal sources in his functional area.
There are ongoing debates about how much potential bottom-line
savings are available throughout the industrial sector, but
PG&E Energy Services' DeMartini estimates that only about 70%
of potential savings are actually captured by the typical
industrial energy user. Attaining that remaining 30% is a prime
target for outsourcing consultants.