Of energy performance contractors and cons

19th October 2001 By: Terry Mackenzie-hoy

I was going to write about the proposed Eskom Structural Tariff Adjustments which have been recently proposed but, hey, why subject readers to so much raw action and excitement at one time, and so I thought rather to write about saving money on your power account.

To begin at the beginning. It so happened that one of the first energy performance contractors was James Watt (or so I heard). He offered, way back when, to pump water using his new condensing steam engine with pump attached. At the time, water pumping was done with a non-condensing engine which was not as efficient as Watt's. So Jamie boy made an agreement whereby he would be paid in bags of coal, where each bag would be pro rata the bags that he saved from use by using his more efficient engine. Moving to today, we have a number of organisations who trade as energy performance contractors. What they do is to look at your energy use (and the account that has to be paid for such use) and then, providing such is possible, they will offer to install equipment that will reduce the account. Their payment will be proportional to the reduction.

This is a good idea. But a warning! There are very good energy performance contractors out there and some complete con artists. How do you tell the difference? Firstly, look at the CV of the members of the energy performance company. If the organisation has at least one qualified engineer (as in certificated, B.Eng or Bsc(eng) or Pr. Eng) then ask to speak to that person. A brief interview will give you an idea of whether you are dealing with gold or dust. An even better idea is to ask a firm of consulting engineers to recommend somebody.

Having entered into negotiations, the next step is to ask the contractor to do a complete energy audit. This should result in a report which will define the energy use of your company on a per square metre basis, related to production or use of that space. Such an audit will quickly identify if, in fact, any energy savings are possible or not. For example if you find (from the audit) that your office block has an energy consumption of two watts per square metre then no savings are possible (although you might like to issue your staff with flashlights so that they can see while operating their slide rules on gloomy days ). If the energy consumption is say, 120 watts per square metre then you can really save some money. The audit from the contractor should identify savings possibilities but, most importantly, should be commissioned on a 'stand-alone' basis. There should be no commitments based on the report. If you as the client choose at that moment to take the report and go see another energy contractor around the corner, then that should be ok. There should be no "having read our report you may not use the contents to save energy other than by employing us". If the report identifies saving possibilities then the contractor should be asked to make a detailed proposal as to how the saving can be achieved. The proposals will normally be of the nature that the contractor will, at its own expense, install some equipment which reduces the energy account and will be paid from savings over a number of years. If the proposal is not adopted, there should be some agreement that the contractor is compensated for the costs of compilation of the proposal.

All being well, the contract is agreed and thereafter savings on the accounts should appear. You as the client can easily check this – just take accounts from previous years, add about 8% increase per year and see if there is a saving evident. There should be. If not you have a right to query why not and, in extreme cases, get a consulting engineer to investigate. But, if you have chosen your energy performance contractor carefully then this should not be necessary. As I said, there are some brilliant contractors out there and some sharks. Some shark-detection methods : If the contractor mentions "power factor correction" as a means of saving, check if your power account has a maximum demand component (kVA). If the letters "kVA" don't appear anywhere on your account summary, then power factor correction won't work for you.

If the contractor says that a "special meter" is needed which costs a lot of cash, find out exactly what is meant by this – if the device is a load prediction or load shedding device then this is legitimate – if it's a superior form of energy meter then the municipality normally provides this. If the contractor says that you can save money by "a simple tariff change" be sure what is implied – to change existing tariffs often requires quite a large payment for the change and sometimes a levy to offset diminished cash flows to the utility supplying the power. But, in contrast, I might point out that I often deal with organisations who have many properties and who, using a good energy contractor, could save millions of rands. I tell them this and they often say "Oh, we know about that" but they do nothing. Why, I don't know.