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Outsourcing Isn't Always In With End Users

Outsourcing Isn't Always In With End Users

Significant savings are increasingly hard to come by for large, multi-facility energy users even with the help of outside energy experts, according to panelists last week discussing energy management outsourcing at NGI's GasMart/Power '99 in Dallas.

Industrial customers need to push down the energy decision-making in their organizations because in this more competitive energy world commodity buying decisions need to be made hour-by-hour and minute-by-minute, said Terry Cowan, vice president for energy procurement and management at Brubaker &amp 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 unbiased way."

PG&ampE 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&ampE 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 "supply-related consultant."

"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&ampE 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.

Richard Nemec, Dallas

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