Higher energy costs could take firms to the cleaners
When Joe Saluri looked at his business’s utility bill recently, the amount due was so large that he figured there must be a mistake. Unfortunately for him, the big number on the MidAmerican Energy Co. statement was correct.
It was enough to spur Saluri to call MidAmerican to schedule an energy audit, to find ways to make his 1959 building more efficient. Saluri and his brother, Jim, are second-generation owners of Cardinal Cleaners in Des Moines.
The dry cleaning business is already feeling the heat of higher natural gas prices, because it uses the fuel year-round.
With warm weather continuing, most Greater Des Moines businesses aren’t thinking about winter heating costs. However, some steps taken now can begin to pay for themselves once the mercury begins to dip.
MidAmerican officials are concerned that prices could again spike to the $10 per dekatherm level last seen in 2001, when customers’ bills doubled. Natural gas prices at the wellhead have already reached the $5 level, well above the $3 level seen in recent years at this time.
The biggest determiner of demand for natural gas is also the most unpredictable: the severity of winter weather.
To prepare, the utility company is on a schedule to fill its natural gas storage facilities by Nov. 1. Additionally, it’s purchasing nearly half the gas it expects to use this winter on fixed-price contracts prior to Nov. 1. The remainder will be bought on the open market as it’s used this winter. At the same time, MidAmerican is attempting to reach more of its customers with energy efficiency programs.
One of the newer programs is MidAmerican’s Business Check, which began on a trial basis last year. The utility hopes to reach 300 small businesses across Iowa with the program by the end of the year. For larger companies with more than 25,000 square feet of space, there’s a similar energy audit program. Businesses can receive a credit on their utility bills for the $100 fee, if they recoup at least that much in actual savings after making changes.
For the largest companies, MidAmerica would provide a proposal for an energy audit. The company can then earn a credit for up to 50 percent of the cost of the audit based on actual energy savings realized.
MidAmerican also has a number of equipment purchase rebate programs to assist businesses with financing to buy more efficient heating and cooling systems, water heaters and lighting.
“The way we look at it, a company that’s serious about saving energy will end up with the audit being free,” said Dick Walker, MidAmerican’s product manager for commercial energy-efficiency programs. “They’ll end up with monthly energy savings, and to help them afford the equipment, we help buy down the initial cost to install that equipment.”
For Cardinal Cleaners, energy costs are a large portion of its business expenses, because it operates a huge steam boiler and lots of electrical equipment. The shop’s total energy bill normally runs about $3,500 a month.
“The winter before last, we had a severe cold snap,” Joe Saluri said. “I think we had one bill that was $8,900, and that was quite a bit.”
For most small businesses, electricity costs are larger than gas costs, said Brian Hall, general manager of A-Tec Energy, an energy consultant contracted to perform energy audits for MidAmerican.
“They typically are intensive users of lighting and various types of equipment and computers,” he said.
In Cardinal Cleaners’ case, it’s the other way around. Two-thirds of its utility bill comes from year-round gas usage. Hall and his inspector found little that could be done with its old building, other than installing more efficient lighting.
With a boiler only 13 years old, replacing it with a more efficient model wouldn’t be cost-effective, he noted. Also, another solution that usually works for office buildings – installing a drop ceiling and insulating – wasn’t an option because of the heat generated by the dry cleaning and laundry equipment.
“It’s a tough building to work with,” Hall said.
Businesses interested in more information on energy efficiency programs can call MidAmerican Energy at (800) 894-9599.
FIXED-PRICE ENERGY CONTRACTS PROVIDE SOME ASSURACE
Archie Brooks knows a great way to shield his buildings from high natural gas costs: heat with electricity, and lock in a low seven-year fixed rate. Brooks, vice president of Ruan Center Corp., manages the Ruan Center complex downtown.
The fixed-rate contract has turned out to be an excellent deal, Brooks said. “On the average, my electricity’s right around 2.9 cents per kilowatt hour in the winter. It’s a very good rate. It’s a little bit higher in the summer, about 4.6 cents.”
Another downtown building manager feels fairly confident about the winter, having locked in a fixed-rate natural gas contract several years ago.
“We are hoping things are not going to be as dire as they are saying,” said Dee Grove, director of management and leasing for EIB Acquisition, which manages the 23-story Equitable Building downtown.
The milder the winter, of course, the less gas and the lower the overall cost will be for building owners and their tenants.
Both Ruan and EIB have investigated measures such as installing more energy- efficient windows, but each decided they would not be cost-effective.
Ruan negotiated its electric contract about four years ago, when the Iowa Legislature was considering a bill to deregulate the state’s electricity market. MidAmerican Energy Co. offered Ruan and other large customers a fixed rate if they agreed to stay with MidAmerican.
Ruan has also installed frequency drives on its electric motors, which allows them to operate at less than 50 percent capacity most of the time, he said.
“By continuing to do things like that, I’ve lowered my electrical costs to the tenants,” Brooks said.