Mr. Kiesner

Eco-Friendly Practices

One New Year's Resolution That Always Makes Sense

By Steve Kiesner, Director of National Accounts, Edison Electric Institute

With the price of natural gas predicted to be lower this winter than last year, you may be tempted to take your eye off the energy bill for a moment. Don't. The smart hotel executive knows that the search for ways to get more value from every dollar spent on energy-both natural gas and electricity-never takes a break. For the New Year, dedicate one of your resolutions to becoming more energy efficient. You'll find the payoff to be greater profitability for your company all year round.

The U.S. lodging industry spends close to $4 billion on energy every year, according to the U.S. Environmental Protection Agency (EPA). If hotels could improve their energy performance by an average of 30 percent, the nation would be breathing even easier, and the hotel industry's annual electricity bill savings alone would be nearly $1.5 billion. This would represent a savings of approximately $365 per available room night per year for every hotel room in the country. The good news is that there are many simple steps your staff can take to use energy more efficiently. And the great news is that electric utilities can help you.

The forecast for natural gas prices

According to the latest Short Term Energy Outlook from the U.S. Energy Information Administration (EIA), relatively high levels of natural gas in storage and a forecast of slightly warmer-than-normal weather (though not as warm as last winter) should result in lower natural gas prices lower this winter. Nationally, hotels and other commercial customers are expected to pay about $11.85 per thousand cubic feet (mcf) of natural gas, which is equal to approximately 10.27 therms, in the first quarter of 2007, and $10.51/mcf in second quarter. Last winter, prices averaged $13.19/mcf in the first quarter, and $11.59/mcf in the second quarter. A few regions, particularly the Northeast, will see higher prices this winter-$14.24/mcf in the first quarter, and $12.94 in the second-than last winter. And keep in mind that although natural gas prices overall are lower this year, the price for a therm of gas is still at an historical high. Today's price is about double the price in the 1990s.

All natural gas consumers-industrial, commercial and residential-are feeling the effects of high-energy prices. High prices for natural gas, heating oil and transportation fuels are having a ripple effect throughout the economy. Utilities that use natural gas to generate electricity also are feeling the pinch. Electric utilities do not benefit from higher energy prices, since they are often "caught" between high fuel costs and regulatory limitations on electricity rates. Like consumers, these utilities are seeking to use natural gas as efficiently as possible and are switching to fuels that are more economical whenever it is feasible.

There are no quick and easy answers to our energy policy challenges. Increasing the supply and diversity of our nation's available energy resources involves long-term solutions. Eighty-five percent of the natural gas consumed in the U.S. is produced domestically, and almost all the remainder of our supply is imported from Canada. New North American supplies and infrastructure need to be developed for the future, especially in those areas that are currently restricted or off limits in the Rocky Mountains and the Atlantic and Pacific coastal areas.

The nation's electric utility companies are among those who are calling for the new Congress to work with the Administration and the states to increase access to oil and natural gas supplies from our vast onshore and offshore resources, including from the unleased portions of leasehold 181 in the Gulf of Mexico, and to extend the drilling season for selected onshore areas.

Improve your energy efficiency

In the short term, using natural gas and electricity more efficiently is vital. As you may know, your electric utility is a good source for information and assistance to help you get started. Your electric utility will likely have historical data about your energy use. Utility representatives can also help you with answers about their efficiency and demand response incentive programs, discount electricity rates, energy-efficient equipment, or any other energy-related question.

There are also a number of quick and easy steps your company can take right now to step up its control over energy use.

These are probably already second nature to you, but here is a short refresher course:

For the longer term, it is a good idea to renew your commitment to energy management. If you have not done it already, start by building a team within the company or within each hotel. Generally, you will need representatives from management or administration. Top-level commitment is paramount. Pull the team together for a planning session and start laying the groundwork. The team will need to define success with goals that are realistic.

Is saying you want to save 20 percent over two years possible? What is the base you will measure against? How and when will you measure progress? For some inspiration, Marriott International in 2005 conducted comprehensive, systematic evaluations of all operating systems at its hotels. Energy consumption dropped by 5 to 20 percent at participating properties, according to the EPA.

Before you begin making capital improvements to save energy, understand which appliances are your big energy users. Water heating alone, for example, can account for almost 40 percent of a hotel's total energy cost-and up to two thirds of its natural gas use. Listed below are the areas and the appliances that will affect your energy bills this winter. A small improvement in these places will make a large impact on the bottom line.

Hilton Hotels continually evaluates new technologies through pilot projects, according to the EPA. When a project is completed, information about the process and the savings is shared with all the Hilton hotels. One hotel is saving almost $270,000 per year in energy costs after the installation of digital thermostats that monitor room occupancy and automatically adjust the temperature when occupants enter (or exit) a room.

The nation's comprehensive new energy law, the Energy Policy Act of 2005 (EPAct), can help you take charge of your energy use as well. The legislation includes a range of measures to improve energy efficiency, including a tax deduction of $1.80 per square foot for new commercial buildings that meet a 50 percent energy reduction standard. Qualifying buildings must save 50 percent or more in energy costs compared to a reference building defined by ASHRAE 90.1-2001 standards. This tax deduction applies only to interior lighting, heating and cooling equipment, water heating and the building envelope on a per building basis. If the building does not qualify for envelope savings that are 50 percent over the ASHRAE standard, it might still qualify for interior lighting savings, but at a reduced maximum tax deduction-$0.60 cents per square foot.

Besides tax deductions, federal tax credits are also available through EPAct for hotels and other commercial buildings. These credits apply to photovoltaic/solar thermal panels, microturbines, and fuel cells that are installed this year and next. Note that systems for heating swimming pool water are not eligible for the tax credit.

The solar power credit is 30 percent of the cost in the installation year with no cap. For microturbines with a maximum capacity of 2000 kilowatts (kW), the credit is a maximum of $200.00 per 1 kW produced, up to 10 percent of the cost. And fuel cells that generate at least 0.5 kW using an electrochemical process are eligible for a maximum of $500.00 per 0.5 kW produced up to 30 percent of the cost.

The window for these incentives is scheduled to close on December 31, 2007, although discussions are underway that could extend it. As with the other tax credits, you should try to combine the federal credits with any applicable electric utility or state incentives.

Taking these steps will get your company off to a great start in 2007. They will make it more energy efficient, which can mean operating cost savings. And they can help make it more impervious to energy price spikes as well. Both can add up to greater profitability for your company, and a future with more reliable, affordable and environmentally sustainable energy supplies for the country.

Steve Kiesner is Director of the Edison Electric Instituteís National Accounts Program. Based in Washington, D.C., Edison Electric Institute (EEI) is the association of United States shareholder-owned electric companies, international affiliates and industry associates worldwide. Our U.S. members serve approximately 90 percent of the ultimate customers in the shareholder-owned segment of the industry, and nearly 70 percent of all electric utility ultimate customers in the nation. They generated almost 70 percent of the electricity generated by U.S. electric utilities. Mr. Kiesner can be contacted at 202-508-5000 or skiesner@eei.org Extended Bio...

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