Tame Your Telecom Spending

As Reported by National Business Association

Copyright (c) 2009 Nermine Shaker The Sygnal Group Telecom spending can be a very large part of a company’s operating costs. Companies are always looking to keep their costs under control and telecom spending is one of the more difficult areas to manage. Even with the increase in value and flexibility from new technology, companies have also seen an increase in their telecom costs. Mobile phones, remote network access and broadband solutions have simplified our workspaces, but have complicated the telecom accounting procedures. Although you can’t just forgo your telecom services to cut your budget, you can curb and control them. Here are a few ways to tame your telecom budget. Assess Your Inventory What do you have? What do you use? Sometimes you don’t use what you have. Take an inventory of all your lines, services, hardware, mobile devices, and contracts. As you do this you may find that employees have left but you are still paying for their cell phones, or departments have closed and you are still paying for their phone lines. Wireless devices can be a huge drain on your company pocketbook. Sometimes employees are given mobile devices that the company pays for and sometimes they use their own and are reimbursed. Organizing and setting up a company policy for wireless devices takes time but can save you money in the end. Audit Your Bills Check your contracts and see if the pricing in the contract matches the pricing on your bill. If not, you’ll need to apply for a credit for those overcharges. If you were promised a refund or rebate in your contract, make sure you received those. If you’ve done a complete inventory, matching bills to the inventory is a great way to identify problems. Assess Your Usage Now that you know what inventory you have and that you are paying correctly for that inventory, you need to look at your services with an eye to how your company is using them. Is your company growing or downsizing? Don’t just cut back to cut back. Look at the value the services provide to your company. Employee personal usage of business telecom services should be addressed as well. If you provide perks like home broadband, business mobile devices and WiFi access, boundaries should be addressed with employees in a telecom company policy. Managers must take responsibility to enforce whatever controls the company puts in place. If your business has multiple locations or if many of your employees work from home, voice over Internet protocol (VoIP) might be a cheaper option. VoIP can connect offices and remote workers and could offer big savings. Renegotiate Your Contracts After you have reviewed your contracts and current usage, it might be time to renegotiate your contracts. If it’s been a while, you might be able to get a better deal. Or, after looking at what you have, you may decide to consolidate or cancel some services. Carriers would like to have all of your business, so in consolidating with one, you may get a higher discount. Shop around to make sure you are getting the best deal. Sometimes, it may be better for your business to use flat rates and per-user or per-month services. This will give you a predictable monthly payment. If it is possible, you many want to consider adding a “business downturn” clause when you renegotiate your contracts. This clause will allow you to renegotiate your contract if there is a downturn in your business, such as having to close one of your multiple offices. Automate Your Telecom Bill Paying Process Many businesses use multiple carriers for all of their telecom services. These carriers each send a separate invoice and sometimes they charge extra for sending a paper invoice. Automating your telecom billing and payments can save you money, both in internal processing costs and in staffing resources. When you automate your billing, you can still have the opportunity to review all your charges. You will have access a variety of reports that can break down the charges by service, circuit, department, location, or carrier. Consider Hiring A Telecom Management Company For smaller companies, the business owner is often in charge of telecom spending. As the size of the business increases, telecom responsibility moves from one person to a group or a department. A telecom management company can help assess your spending and inventory, provide automated billing and can negotiate contracts for you. Since they are familiar with all the telecom carriers, they will be especially helpful in finding you a good rate and negotiating the contract. They can even apply for refunds on your behalf for services that were incorrectly billed. Dealing with one telecom management person is always preferable than having to deal with 10 different service providers. And, when you work with a management professional, they will always be looking out for other ways to save money in your telecom spending, something you can’t always do. It’s tough to tame your telecom spending. It takes time and effort. These days, cost cutting is a must and we are all trying to do more with less money. Getting organized, especially in the telecom area of your business will help you to see where you can cut costs and make sound telecom business decisions. Our Perspective: Telecom is a very important expense for any business. It represent the companies tie to the public, where service is king.  All things being equal, your ability to respond and meet your client’s needs ranks first. It all begins with communication. How are decisions made to insure this success? In speaking with many clients, there is intial hesitancy to examine this process. The fear of disruption lingers. What if we start having problems? Everything seems to work fine now? But what is the real cost for the staus quo? You might be surprised! With recent advances in the telecom industry, savings and efficiencies can be found. We are working with a client right now that has 3 different providers in multiple locations. In reviewing their existing bills we have been able to consolidate these services to 1 provider and provide a savings of close to $50,000 per year. Where was there existing provider? Why did they not reach out and reviw these options with their client? Do not be complacient! Your ability to be successful in today’s business climate relates directly to your abilty to be competitive, control cost and continue to service your clients. Hutchinson Business Solutions has great success in this area. Contact us for a no cost review of your voice and data expenses. Email george@hbsadvantage.com

Natural Gas Prices Rise

As reported in Courier Post

NEW YORK — Sparked by a cold snap in the northeast, home heating fuels are getting more expensive even though supplies are well above normal for this time of year.

Heating oil futures spiked with crude oil contracts last week. Retail prices followed, surging an average of 10.2 cents per gallon for residential customers by Monday, according to an Energy Information Administration report released Thursday.

Natural gas prices rose everywhere for retail customers, with hikes of between 31 cents and $1.14 per each million British thermal units in the lower 48 states.

Our Perspective:

Winter is setting in and we are beginning to see Natural gas prices rise based on anticipated demand. Overall, this is still a good time to lock in natural gas prices in the deregulated market.

With prices being at a 3 to 4 year low, locking in your price gives you protection against market fluctuations and produces savings over the lifetime of the contract. Many of our clients are looking at 12 month to 24 month contracts.

Should you go back and look at your natural gas prices in 2008, you will find that you were paying over $12.00 a decatherm ($1.20 a therm). Currently the prices can be found in the high $7 range to low $8 range based on usage and demand. As you can see, this is close to a 30% savings.

Would you like to know more? Leave a comment or email george@hbsadvantage.com

Unforseen Tax Benefit of a Merger

The US Dept of Labor states that if your company has been involved in a merger or acquisition, there is a 50% chance that you have been assigned the wrong rate and you may be overpaying taxes.

 How can that be, you may ask?

This is due to the Governments inability to properly record these transactions!

Hutchinson Business Solutions LLC (HBS) has great success working with clients who have been thru a merger, acquisition or restructuring. We have a 90% success rate, correcting these rates and providing credits and or refunds for our clients.

We offer a no cost evaluation of your current rate. We work on a contingency basis; there is no upfront cost associated with our services.

Contact us to see if you may qualify. Email george@hbsadvantage.com  or call 856-857-1230

 To learn more, visit us on the web www.hutchinsonbusinesssolutions.com

Deregulated Utility Savings

About Electric & Natural Gas Deregulation

Regulation of public utilities by federal and state governing bodies dates back to the 1930s and was instrumental in forming the vast infrastructure we have today. Without the oversight and a guarantee of financial return on investment, we would not have had the money or rules needed to build the reliable systems that now span the continental U.S. Through the years, there have been a number of regulations (Federal Power Act of 1935, Public Utilities Holding Company Act of 1935, Natural Gas Act of 1938, Public Utilities Regulatory Policy Act of 1978, Energy Policy Act of 2005, et. al.) that have helped shape the relationship between utilities and their customers. Though the rules have changed over time, allowing deregulation of the natural gas and electric industries, two things remain constant. Federal regulation of interstate commerce is performed by the Federal Energy Regulatory Commission (FERC), and regulation of intrastate affairs is handled by the respective state Public Utilities Commissions.

The electric and natural gas industries are very similar in their structure and operation. Each has three distinct components (i) the commodity SUPPLY portion (ii) the long-distance TRANSMISSION of the commodity and finally (iii) the local DISTRIBUTION of the commodity to our homes and businesses. For many years, your local utility handled all three phases of the business in a “vertically integrated” manner. After decades of growth, construction, and addition of market participants, it was determined that competition could safely be introduced via deregulation of the natural gas and electric industries. To address the needs of a competitive environment, those three phases of utility operations were separated, rearranged and in some cases sold off to other companies or regional transmission organizations.

Deregulation of the electric and natural gas markets came on the heels of deregulation in the airline and telephone industries. Those industries underwent drastic changes during periods of expansion and contraction. Today, airfare and phone rates adjusted-for-inflation, are considerably less than they were in the 1980s and many new products and services exist. In deregulation of the natural gas and electric industries, only the price of the commodity supply has been opened to competition. This means consumers in many states, who are served by investor-owned utilities, are now able to choose who supplies their natural gas and/or electricity. The transmission and distribution of natural gas and electricity is not open to choice, and the price for those services continues to be set by state and federally approved tariffs. The push for deregulation of natural gas and electric came when the FERC decided it should limit its authority to wholesale transactions. This move cleared the way for individual states to determine if and how they should allow retail price competition.

Our perspective:

Currently there are many companies taking advantage of this opportunity. Natural gas and electric market prices are the lowest they have been in the last 3 to 4 years.

Should you want to know more about this opportunity for your company; you may email george@hbsadvantage.com or call and ask about our no cost evaluation 856-857-1230

Deciphering the US Natural Gas Market

Posted on Oct. 16, 2009

By Allen Brooks

 

In the last six weeks natural gas futures prices have jumped from a modern day low to nearly $5 per thousand cubic foot (Mcf) as commodity traders and investors started to cover their short positions in this fuel as the days moved closer to the beginning of the winter heating season. The jump in the gas price ends what has been an extended price slide that started back in summer of 2008 when prices were in excess of $13 per Mcf and early signs of the developing global recession emerged.

The traders and investors who have been covering their negative bets on natural gas prices have been motivated by signs the nascent U.S. economic recovery is gathering strength, especially among sectors such as automobiles and home construction that are large consumers of natural gas and its components as feedstocks for petrochemical materials. Additionally, there was the realization that the ratio of crude oil to natural gas prices, which at one point this summer stood at 27:1 (27.08) in contrast to the inherent energy- value ratio of 6:1, was way out of line historically and certainly unsustainable.

At the start of 2009, the oil-to-gas price ratio stood at slightly under 8:1 (7.94). It subsequently dropped in early January to the low so far for the year of 7:1 (6.79). Since that point the ratio has climbed steadily, reaching its peak on September 3rd. After falling to a recent low of 13.67, the ratio has bounced around due to volatility in both crude oil and natural gas prices, but it seems to be locked into a range of 14 to 15:1. The big question is with winter energy demand about to arrive will cold temperatures drive natural gas prices higher while at the same time crude oil prices remain stable, or possibly weaken further, given the continuing sluggish economic recovery?

Natural Gas Is Historically Cheap Even After Recovery; sources: EIA, PPHB

 When we look at the ratio of crude oil to natural gas prices for the past 15 years, it is interesting to note how the ratio has become more volatile and higher in recent years following almost a dozen years of a relatively stable relationship fluctuating around a 7:1 ratio as shown by the dark blue line from 1994 up until 2006 on the accompanying chart. The most recent years have demonstrated considerably greater price volatility between the two energy fuels. It appears the ratio averaged closer to 11:1 from 2006 through 2008. Volatility in the ratio has exploded in 2009. We have marked the low, high and current ratios with small red lines. It was this volatility and the extreme undervalued nature of natural gas that enticed more and more investors and traders into the commodity trade of the decade, which was to buy natural gas futures while at the same time selling crude oil futures. For significant parts of this year that trade didn’t work, but in recent weeks it has. Part of the success of the trade has been the calendar working against commodity traders who earlier in the year had sold natural gas futures with the expectation that gas prices would continue to fall. If they sold them early enough in the year, then they had profits locked in when natural gas prices started to climb. As time passes, bringing the start of the winter heating demand season closer, the impetus for higher natural gas prices strengthens. As a result, these commodity traders are now covering their short positions by buying near-month natural gas futures adding upward pressure to the gas price.

 If one looks at the current prices for physical deliveries of natural gas, there is almost a $1 spread between them and the current November futures price. If we average all the physical gas price points as of October 8th, contained in the Enerfax Daily schedule, it comes to $3.98 per Mcf. This is when the November natural gas futures price traded for $4.96, or a spread of $0.98. This spread is truly reflective of the near-term oversupply situation for natural gas and the optimistic demand outlook associated with the futures price.

 The nearly 100 percent increase in natural gas prices since the beginning of September seems counter-intuitive given the industry’s fundamentals. Natural gas storage facilities and pipelines are nearly all at full capacity forcing gas producers to involuntarily shut-in some of their current production. In other words, near-term industry fundamentals suggest the market should be experiencing weaker natural gas prices, which is consistent with the physical gas prices. On the other hand, the intermediate and longer term outlooks for natural gas demand point to higher prices in the future.

 The brighter over-the-horizon outlook reflects a universal belief that industrial demand for natural gas will recover with the economy and the recent growth in gas production volumes will slow and eventually reverse as the impact of the significant cutback in gas-focused drilling takes its toll on output.

 

Rigs Drilling For Gas Have Been Cut In Half; sources: Baker Hughes, PPHB

 From the peak in natural gas drilling activity, the gas-oriented rig count has been cut by more than half. In recent weeks the number of rigs drilling for natural gas has begun to rise. It is this rig count increase in the face of an essentially stable natural gas production level that has investors, commodity traders and industry people puzzled. While a simple graph of onshore natural gas production is showing a decline since late last year, overall gas production has remained relatively flat for the past nine months as production from the Gulf of Mexico has risen to offset the decline in onshore gas production.

 After dropping due to Hurricane Ike last September, Gulf of Mexico natural gas production has recovered and is now above the declining trend line that extends back to the start of 2005. In fact, current gas production is back to where it was at the start of the summer of 2008. The recovery and subsequent production growth of offshore natural gas helps explain why total U.S gas production has remained healthy in the face of weak prices for most of this year.

 What continues to be absent from the dynamics of the natural gas market is a sustained pickup in industrial gas demand. Increased heating-related gas demand is inevitable as winter arrives. The issue will be the amount of heating demand increase if other economically-sensitive gas demand remains dormant. A recent forecast by Matt Rogers of Commodity Weather Group suggests that the U.S. Northeast may experience its coldest winter in a decade due to the development of a weak El Niño in the southern Pacific Ocean region. Mr. Rogers point is that 75 percent of the time a weak El Niño develops, colder than normal temperatures are felt in this region of the country. Of course, there is a 25 percent chance that it won’t develop.

 When an El Niño develops, which it does periodically, the path of the upper atmosphere’s jet stream across North America is altered. Typically the alteration involves the jet stream dipping lower on the continent, i.e., shifting from Canada down into the United States, which allows Arctic cold weather to move further south than normally and into the Midwest and Northeast regions of the country. The challenge with predicting this jet stream shift is whether it becomes a more permanent shift during the winter months or only shifts occasionally.

 Even the Farmers’ Almanac is calling for a colder winter than in recent years for at least two-thirds of the nation. Importantly, that means more periods of bitter cold weather for two of the major populous regions of the U.S. That should boost natural gas demand. The one naysayer seems to be the Energy Information Administration (EIA) that is calling for heating bills this winter to be about 8 percent lower than last winter due to both milder temperatures and lower oil and gas prices. The EIA says it expects winter temperatures to average 1 percent warmer than last year – a sharp contrast to the independent weather forecasters. Maybe their forecast is tied to their view about the role of global warming. The real problem for the natural gas industry is that it really needs a recovery in industrial gas demand to help smooth out the industry’s supply/demand trends, and the latest government economic statistics suggest a mixed bag in that regard.

 So far this year, natural gas prices have fallen from $6 per Mcf at the start to a recent low of $2.50 before rallying back to $5 in recent days. These prices are a far cry from the $13-$14 per Mcf prices achieved in the halcyon days of the summer of 2008. The extended price decline, while partially explained by the fall in industrial gas demand, has largely been attributed to continued over-production of natural gas from the industry’s highly successful gas-shale drilling efforts that are spreading across the country. The growth in the past several years of natural gas production associated with these successful gas-shale developments reversed an eroding production profile for the industry that had existed for decades. The questions facing the industry now are whether gas-shale production will eventually overwhelm traditional natural gas drilling and production efforts and whether it is possible that the U.S. becomes a net gas exporter at some date in the future.

 To help arrest the growth in natural gas production and boost gas prices, producers have cut back their drilling activity by roughly 50 percent since last fall, but because gas-shale wells are so prolific compared to conventional gas wells, the drilling reduction appears to be having limited impact in slowing production growth. In the latest monthly data from the EIA’s industry survey, gas production does appear to be falling, at least on land. The challenge, however, is to try to decipher whether this production decline is real or involuntary.

 Natural gas storage as of September 25th was at 3,589 billion cubic feet (Bcf) out of an estimated industry-wide capacity of 4,000 Bcf. The problem is that natural gas storage facilities are spread around the country in the eastern and western consuming regions and in the gas producing areas. Additionally, there are limitations on the amount of natural gas that can be transported via pipelines from the producing regions to the consuming markets. As a result of these infrastructure limitations, the overall storage capacity ratio may not accurately reflect the true impact that high storage volumes are having on gas production.

 When we look only at industry-wide storage volumes plotted against total natural gas production, the surge in storage appears to be coinciding with a flattening, and now declining gas production.

 The level of gas storage volumes and the amount of injections shows even more clearly how the nearly full storage levels are impacting gas production.

 As total gas in storage has climbed to a record high, even after a roughly 100 Bcf of new storage capacity added, injection rates have fallen to low levels as there is little appetite or room for more gas. Some portion of the fall in current natural gas production has to be associated with involuntary production curtailments. The challenge is to determine how much of a fall-off is due to curtailments and how much is a fall in well productivity.

 To begin to look at this issue, we were provided data for monthly natural gas production in Texas. At this point we cannot vouch for its correctness, but we plotted it against the initial daily production by month for the state coming from the EIA’s Form 914 survey of gas producers. Lastly, we went to the Texas Railroad Commission web site and took only the 2009 monthly natural gas production data currently available, converted it to daily production figures, and plotted that data. The point of the exercise is to show that all these Texas natural gas production data sources are consistent in their pattern – steadily down. The interesting thing is to look at the shapes of the curves for 2009. The production data provided to us shows flat production for several months and then a steep decline. The EIA’s data shows a decline but at a more modest pace for all of 2009. The Texas Railroad Commission data shows a steady decline, but at a much faster rate than the EIA data. Unfortunately, these curves don’t answer the question: Is the decline due to falling natural gas well productive capacity, or is it a function of low prices, or is it due to involuntary cutbacks due to rapidly filling storage capacity?

 Since a lot of Texas natural gas tends to have higher finding and developing costs we suspect that some of the fall in gas production has been due to the weak gas prices. Producers must have been looking at their costs versus market prices and deciding to shut-in gas production. But some of the fall off in production has to be associated with older, less productive wells. Our guess is, however, that between these two explanations, the former is more important than the latter, but we cannot prove this conclusively.

 So while we wrestle to understand the current falling gas production figures, we are drawn back to looking at what the industry is doing with its drilling effort. The sharp fall-off in gas-oriented drilling rigs will eventually take a toll on production, but for the time being one has to be concerned about the recent uptick in the gas-oriented rig count before we know why production has fallen.

 At the same time, when we look at gas production compared to the number of rigs drilling horizontal wells, although we know not all rigs drilling horizontally are seeking natural gas, the strong upturn there could be a precursor of future gas supply challenges since the gas- shale wells, drilled horizontally, are so much more productive than conventionally drilled gas wells.

 The chart of gas production versus the total number of rigs drilling either directionally or horizontally shows a potentially less ominous supply challenge for the natural gas industry.

 The recovery in natural gas prices back to the $5 per Mcf level is certainly a positive for the industry. The latest production figures suggest that gas supplies are shrinking, but the weekly gas injection figures continue to reflect the impact of nearly full storage capacity. We can safely assume that gas production volumes are being reduced due to involuntary well shut-ins. What we don’t know is whether the industry is Wiley Coyote having run off the mountain road and is now suspended in air waiting to fall.

 Is natural gas production about to drop like a rock? Or is it possible we just need to get rid of some of the gas storage volumes with cold weather allowing producers to ramp back up their shut-in wells? That last scenario will come with current or higher winter gas prices. The former scenario suggests a natural gas price that rockets straight up. Unfortunately an exploding gas price will bring with it the seeds of the next price collapse.

 We reiterate our view that without a healthy economy the natural gas market will struggle to regain solid economic footings.

Our Perspective:

The market has presented great opportunites for companies to lock in their natural gas and electric prices in the deregulated market. Many of our clients have found unexpected savings.

Although the market has ticked up in the last couple of days, lack of demand have still kept the market price competitive from what you spent over the last 12 months.

If you have not looked into these opportunities, it still is not too late. Prices are dynamic and timing is everything.

Take the first step and ask the question, ” How much can we save?”

You might be surprised by the answer.

If you would like to know more about growing your bottom line from savings in the natural gas and electric market, feel free to contact us?

You may email george@hbsadvantage.com or leave a comment and we will contact you.

There are no upfront fees and all the savings fall to your bottom line!

 Allen Brooks is a managing director at Parks Paton Hoepfl & Brown, a Houston-based energy-focused investment banking firm. This article previously appeared in the October 13 issue of Musings From the Oil Patch.

Study: A green city needs deeper commitment

Posted on Sat, Oct. 10, 2009

 

By Diane Mastrull

Inquirer Staff Writer

 

If Philadelphia is to fully capitalize on the business-growth and employment potential of the nascent green economy, a deeper commitment is needed from government, nonprofits, and the private sector, a study released yesterday concludes.

Help is especially needed to train a workforce for these new jobs.

The Emerging Industries Project is a 93-page analysis of three areas of the green economy: sustainable manufacturing, construction and demolition waste recycling, and energy efficiency and building retrofits.

Other sectors are planned for future study, said Kate Houstoun, green-jobs coordinator at the Sustainable Business Network of Greater Philadelphia. It directed the study, along with the Green Economy Task Force, to help guide funding that has begun to pour from Washington and Harrisburg to grow sustainable businesses and create jobs.

“Hundreds of millions of dollars are being invested,” Houstoun said. “We want to ensure that those are wise investments.”

The research was largely based on input from 40 local businesses looking to thrive in the green economy. The industry sectors highlighted in the study were selected for their growth potential and the likelihood they would create family-sustaining jobs, especially for those who have the most difficulty landing work, Houstoun said.

The report cited deregulation of electricity generation and the increasing affordability of energy-efficiency options as driving business growth in the energy-efficiency/retrofit sector. What’s needed, it said, are workers with “the ability and willingness to learn new skills and technology.”

The city could play a big role in developing a vibrant construction and demolition-waste-recovery industry, the report said, by prioritizing bids for public projects from building contractors whose plans include such materials recycling. It also suggested adoption of an ordinance mandating such recycling for private-sector building and demolition projects.

But it was manufacturing that dominated the report.

While the city has lost 400,000 manufacturing jobs over the last four decades, that sector also represents “a new and exciting era” in Philadelphia, the report said. It cited the city’s infrastructure “from its workshop-of-the-world past” among the assets that position Philadelphia to catch “this wave of green manufacturing at the forefront.”

What the city lacks, the report found, is a workforce adequately prepared for green-economy manufacturing. Rather than mass-produced goods, the factories of the green economy will be required to produce highly specialized products for such things as solar panels and wind turbines requiring sophisticated equipment and processes and well-trained employees.

In addition to calling for the creation of more workforce development programs, the report’s manufacturing recommendations include:

Changing city procurement policies to give preference to local manufacturers.

Growing and finding ways to connect local supply and demand markets so that manufacturers can be assured of buyers for their goods.

Establishing a “green clearinghouse” of resources available to manufacturers for sustainability initiatives.

Because the report had input from a number of “key stakeholders,” including the city Commerce Department, the Philadelphia Industrial Development Corp., and Select Greater Philadelphia, Elliott Gold, the author of the manufacturing and waste-recovery sections, said he was optimistic that “our recommendations will actually be read and have higher likelihood for actual implementation.”

Among those intent on seeing that the report does translate into action is Natalia Olson-Urtecho, who serves on the city’s planning and zoning code commissions. She was also an adviser to the manufacturing and construction-waste-recovery portions of the report.

On manufacturing, Olson-Urtecho said, the study makes a case for stopping what has “eroded perilously” the city’s base of industrial-zoned land: the use of such tracts for commercial and residential development. Vacant industrial lots should be converted to clean technology parks, she said.

Solar Energy Outperforming Gas in Colorado

As reported in Courier Post

DURANGO, COLO. — The sun had just crested the distant ridge of the Rocky Mountains, but already it was producing enough power for the electric meter on the side of the Smiley Building to spin backward.

For the Shaw brothers, who converted the downtown arts building and community center into a miniature solar power plant two years ago, each reverse rotation subtracts from their monthly electric bill. It also means the building at that moment is producing more electricity from the sun than it needs.

 ”Backward is good,” said John Shaw, who now runs Shaw Solar and Energy Conservation, a local solar installation company.

 Good for whom? 

As La Plata County in southwestern Colorado looks to shift to cleaner sources of energy, solar is becoming the power source of choice even though it still produces only a small fraction of the region’s electricity. It’s being nudged along by tax credits and rebates, a growing concern about the gases heating up the planet, and the region’s plentiful sunshine.

 The natural gas industry, which produces more gas here than nearly every other county in Colorado, has been relegated to the shadows.

 Tougher state environmental regulations and lower natural gas prices have slowed many new drilling permits. As a result, production — and the jobs that come with it — have leveled off.

With the county and city drawing up plans to reduce the emissions blamed for global warming and Congress weighing the first mandatory limits, the industry once again finds itself on the losing side of the debate.

 A recent greenhouse-gas inventory of La Plata County found that the thousands of natural gas pumps and processing plants dotting the landscape are the single largest source of heat-trapping pollution locally.

 That has the industry bracing for a hit on two fronts if federal legislation passes.

 First, it will have to reduce emissions from its production equipment to meet pollution limits, which will drive up costs. Second, as the county’s largest consumer of electricity, gas companies probably will see energy bills rise as the local power cooperative is forced to cut gases released from its coal-fired power plants or purchase credits from other companies that reduce emissions.

“Being able to put solar systems on homes is great, you take something off the grid, it is as good as conserving,” said Christi Zeller, the executive director of the La Plata Energy Council, a trade group representing about two dozen companies that produce the methane gas trapped within coal buried underground.

“But the reality is we still need natural gas, so embrace our industry like you are embracing wind, solar and the renewables,” she said.

It’s a refrain echoed on the national level, where the industry, displeased with the climate bill passed by the House this summer, is trying to raise its profile as the Senate works on its version of the legislation.

In March, about two dozen of the largest independent gas producers started America’s Natural Gas Alliance. In ads in major publications in 32 states, the group has pressed the case that natural gas is a cleaner-burning alternative to coal and can help bridge the transition from fossil fuels to pollution-free sources such as wind and solar.

 ”Every industry thinks every other industry is getting all the breaks. All of us are concerned that we are not getting any consideration at all from people claiming they are trying to reduce the carbon footprint,” said Bob Zahradnik, the operating director for the Southern Ute tribe’s business arm, which includes the tribes’ gas and oil production companies. None is in the alliance.

 Politicians from energy-diverse states such as Colorado are trying to avoid getting caught in the middle. They’re working to make sure that the final bill doesn’t favor some types of energy produced back home over others.

 At a town hall meeting in Durango in late August, Sen. Mark Udall, who described himself as one of the biggest proponents of renewable energy, assured the crowd that natural gas wouldn’t be forgotten.

“Renewables are our future — but we also need to continue to invest in natural gas,” said Udall, D-Colo.

 Much more than energy is at stake. Local and state governments across the country also depend on taxes paid by natural gas companies to fund schools, repair roads and pay other bills.

In La Plata County alone, the industry is responsible for hundreds of jobs and pays for more than half of the property taxes. In addition, about 6,000 residents who own the mineral rights beneath their property get a monthly royalty check from the companies harvesting oil and gas.

 ”Solar cannot do that. Wind cannot do that,” said Zeller, whose mother is one of the royalty recipients. In July, she received a check for $458.92, far less than the $1,787.30 she was paid the same month last year, when natural gas prices were much higher.

 Solar, by contrast, costs money.

Earlier this year, the city of Durango scaled back the amount of green power it was purchasing from the local electric cooperative because of the price. The additional $65,000 it was paying for power helped the cooperative, which is largely reliant on coal, to invest in solar power and other renewables.

 ”It is a premium. It is an additional cost,” said Greg Caton, the assistant city manager.

Instead, the city decided to use the money to develop its own solar projects at its water treatment plant and public swimming pool. The effort will reduce the amount of power it gets from sources that contribute to global warming and make the city eligible for a $3,000 rebate from the La Plata Electric Association.

Yes, the power company will pay the city to use less of its power. That’s because the solar will count toward a state mandate to boost renewable energy production.

“In the typical business model, it doesn’t work,” said Greg Munro, the cooperative’s executive director. “Why would I give rebates to somebody buying someone else’s shoes?”

The same upfront costs have prevented homeowners from jumping on the solar bandwagon despite the tax credits, rebates and lower electricity bills.

 Most of Shaw’s customers can’t afford to install enough solar to cover 100 percent of their homes’ electricity needs, which is one reason why solar supplies just a fraction of the power the county needs.

 The higher fossil-fuel prices that could come with climate legislation would make it more competitive.

 ”You can’t drive an industry on people doing the right thing. The best thing for this country is if gas were $10 a gallon,” said Shaw, as he watched two of his three full-time workers install the last solar panels on a barn outside town.

 The private residence, nestled in a remote canyon, probably will produce more power from the sun than it will use, causing its meter to spin in reverse like the Smiley Building’s. The cost, however, is steep: more than $500,000.

The Price of Solar Panels Have Dropped Drastically

As reported in Green Inc.

The price of rooftop solar panels has fallen drastically, as I reported in The New York Times on Thursday. But for some homeowners, the upfront costs remain prohibitive.

Indeed, many readers have remarked on the article’s opening anecdote, about a homeowner in the Houston area who installed a 64-panel, $77,000 system (before the 30 percent federal tax credit) for his amply sized house and garage.

One way to bring the initial costs down would be to put smaller arrays on homes. After all, if financial constraints are a consideration, why put dozens of panels on your home when you could put just one or two?

One reason has long been the inverter — the piece of a solar-power system that converts the direct current voltage produced by the panels to accelerating alternating current, which runs through the home. Right now, according to Glenn Harris, the chief executive of the consulting firm SunCentric, it is hard to find an inverter small enough to handle just one solar panel.

But microinverters — which fit on a single panel — are on their way.

Enphase Energy, a company based in California, has shipped 50,000 microinverters since last August, according to Raghu Belur, one of the company’s founders. Each costs about $200, and can be paired with a single solar panel and popped on the roof.

(Single solar panels, producing on the order of 200 watts, can be had for less than $1,000 — though that won’t do much to augment most household power needs.)

 “It is the key to enabling what’s called do-it-yourself-ers,” said Mr. Belur, though he says that it is wise to hire a licensed electrician to make the final connection. (Enphase says that its microinverters do eliminate high-voltage direct current, so there is less danger of a nasty electric shock.)

 “We’re specifying Enphase microinverters in our residential designs more and more often,” said Ryan Hunter, of the Texas installer Meridian Solar, in an e-mail message. The Enphase systems allow for greater flexibility, he said, and are “more shade tolerant in limited spaces.”

 Enphase officials say that having an inverter on each panel increases the efficiency of the solar array. On traditional systems, lower output from one panel — because of dust or leaves accumulating, for example — can affect the performance of every panel in the set. But the microinverters preserve the independence of each panel, so that the panels do not revert to the lowest common denominator of output.

Right now, Enphase microinverters do not come attached to panels. But by the middle of next year, big-box stores, Mr. Harris of SuncCentric predicted, will be stocking solar panels with the microinverters strapped on.

“The real magic is you don’t have to spend $20,000 to $30,000 to get a solar system,” he said.

Should you like to know more about your investment in Solar leave  comment or email  george@hbsadvantage.com

You should review your Telecom Cost

As reported in Midmarket CIO News

Tips for cutting costs on telecom spending

By Karen Guglielmo, Executive Editor 20 May 2009 | SearchCIO-Midmarket.com

Telecom spending accounts for more than half of all IT spending worldwide, according to Gartner Inc. That’s why it can be worth the time to scrutinize bills, identify areas for cost savings and shop around for new providers.

 

More IT spending resources Five key best practices for reducing telecom expenses IT spending and budgeting

So say consultants and CIOs with telecom experience, who offer the following tips for cutting telecom spending:

Assess your telecom inventory and audit your bills.

To effectively manage telecom spending, the first step is to find out exactly what you have and use, by analyzing your inventory and contracts. Take inventory on all lines and services; you may find that though your company has shut down offices or lost employees, you continue to be billed for those services.

“You always want to consider utilization,” said Michael McCauley, a Project Management Professional at TelPlus Communications Inc., a third-party telecom service provider. “You are paying for all these lines, but are you actually using them all?”

McCauley provides auditing and telecom expense management services to companies that want to outsource these tasks. He said that in working with customers and reviewing their telecom spending and bills, he finds that up to 30% of pricing reflected on bills is incorrect.

“Much of the time the discrepancy is something simple, like a contract pricing code not on the account,” McCauley said. Because of this, companies are often eligible for discounts and credits for overcharges.

At Mannatech Inc., a $333 million developer and provider of proprietary nutritional supplements, weight management products and skin-care solutions, CIO W. Jerome Oberlton conducts a quarterly audit on telecom billing and services in-house. “We actually do a match of our telecom inventory to our bills. It helps to manage costs,” he said.

Automate the telecom billing process.

Most companies use multiple carriers for their telecommunication services and thus receive multiple invoices. Automating telecom billing and payment can save companies money because most telecom carriers charge additional monthly fees for paper invoices. Automation can also lower the internal costs of processing each invoice and free up staffing resources in IT and accounting.

Who’s in charge of telecom expense management? Who manages spending on telecommunication services differs depending on the company’s need, size and budget. For instance, a global IT director is responsible for managing telecom spending at Mannatech Inc., a developer and provider of proprietary nutritional supplements, weight management products and skin care solutions. This person works for IT but also coordinates closely with the billing specialists in accounting.  David Williams, vice president of product management and marketing at Covad Communications, said he sees the same type of people in charge of telecom spending for his customers. “At smaller companies, it’s often the business owner [in charge of telecom spending],” Williams said. “As the size of the company increases, the responsibility shifts to the IT department, starting at the VP level and moving down to the director or manager level, depending on the size of company.” Other companies outsource their telecom expense management to service providers like TelPlus Communications, which offers multiple telecom expense management services. –K.G.

Automated billing still gives you the opportunity to review your charges, through either a Web portal where you can access inventory and pricing information or through monthly management reports that break down charges by service/circuit type, location, carrier, etc.

Midmarket companies can either set up their own automated telecom billing process and system, or they can partner with a service provider for it.

Consider hiring a third party to manage your spending and contracts.

Third-party telecom providers like TelPlus Communications can help assess spending, automate billing and negotiate contracts on behalf of the customer. These service providers are especially helpful in contract negotiations because they’re already familiar with the telecom carriers, their offerings and where they’re most flexible for cutting costs.

Telecom service providers give companies a “one throat to choke” option for billing, according to McCauley. “Whether you’re working with 20 or 100 telecom companies, you just have one call to make,” he said. “All of your inventory is in one place, and there’s one project manager to call. That alone is a huge time and money saver.”

Renegotiate contracts.

In this economy, it’s a buyer’s market. Customers can demand the services they want or move to another vendor. So this is the right time to closely review your telecom contracts and renegotiate if needed.

Telecom carriers want all of your business, not just a piece of it, according to McCauley. And the benefits they offer for getting all of your business are higher discounts.

For instance if you have 50% of your business with AT&T and 50% with Verizon, you can include a clause in a renegotiated contract with AT&T saying that if you give the company 90% of your business, you receive a certain rate and higher discounts. This is a win-win for both you and AT&T. The telecom carrier gets your committed business and you get better service and rates.

“We’ve even seen some cases where small-to-medium businesses cancel contracts with the Bells and absorb the cancellation penalties because the savings they get with us more than offsets the switching costs,” said David Williams, vice president of product management and marketing at Covad Communications Group Inc., a national provider of integrated voice and data communications.

Another consideration in renegotiating your contracts is the addition of a “business downturn” clause. This allows the customer to renegotiate the terms of the contract if there is a downturn in its business — such as losing a major client or closing multiple offices.

Don’t overpay for wireless — shop around and consider new converged network technologies.

Wireless is a huge area of misuse and a big area for savings.

“Wireless can be a huge money pit,” McCauley said. “Customers are often put on incorrect plans and are overpaying for services.”

We actually do a match of our telecom inventory to our bills. It helps to manage costs. W. Jerome Oberlton CIO, Mannatech Inc.

There are many ways to save with telecom wireless and data services. One is to move to other types of data networks or new technologies, such as Multiprotocol Label Switching, which can typically carry data and voice traffic at lower costs, or Session Initiation Protocol, which customers can employ to consolidate local voice, long distance and data services onto one network.

Oberlton recently renegotiated his mobile contracts. He switched vendors to gain cost savings.

“By moving from one vendor to another, we got rid of some servers on-site,” he said. “This helped get costs down and receive more volume discounts.”

Oberlton did caution others, however, to beware of penalty clauses for switching vendors, which some telecom wireless carriers are including in contracts. These clauses come with steep fees and should be addressed early in the contract negotiation process, he said.

Our Perspective:

When was the last time you took the time to review your current telecom cost and provider? We find that many companies fail to look at these cost. They know what their monthly cost are and they budget that cost for the future.

Don’t get caught up in this fallacy. There are great opportunity for savings by shopping your current cost. Our clients are finding from 15% upto 40% savings. What would this mean for your company?

Would you like to know more? Call us @ 856-857-1230 or email us and ask about our free evaluation george@hbsadvantage.com

2009 Electricity Prices Plummet

 

By REBECCA SMITH  as reported in Wall Street Journal

Slack demand for electricity across the U.S. is leading to some of the sharpest reductions in power prices in recent years, offering a break for consumers and businesses who just a year ago were getting crunched by massive electricity bills.

On Friday, the nation’s largest wholesale power market serving parts of 13 states east of the Rockies is expected to report that electricity demand fell 4.4% in the first half of the year. That helped to push down spot market prices by 40% during the first half of this year.

Wholesale electricity — power furnished to utilities and other big energy users — cost an average of $40 a megawatt hour in the region, down from $66.40 a year earlier. The price declines in this market, which extends from Delaware to Michigan, come on top of a 2.7% drop in energy use in 2008 over 2007.

The falloff in demand represents a reversal of what has been one of the steadiest trends in business. For decades, the utility sector could rely on a gradual increase in electricity demand. In 45 of the past 58 years, year-over-year growth exceeded 2%. In fact, there only have been five years since 1950 in which electricity demand has dropped in absolute terms.

But this year is shaping up to have the sharpest falloff in more than half a century, and coming on top of declines in 2008, could be the first period of consecutive annual declines since at least 1950.

Dramatic price reductions don’t immediately mean lower power bills for all consumers. That’s because many customers pay prices based on long-term contracts. But lower prices will have a softening effect over time.

In California and Texas, a combination of cheap natural gas and lower industrial demand is putting pressure on prices.

Journal Community

• discuss

“ Good timing for the U.S. to move away from its carbon obesity era. ”

—Barrie Harrop

In the Houston pricing zone, which has many power-gobbling refineries and chemical plants, the spot market price was $61.82 in June, versus $129.48 a megawatt hour a year earlier. Power demand in Texas is down 3.2% so far this year due to business contraction and reductions in employment which are causing many households to economize.

Just a year ago, many businesses and residential customers were reeling from electricity prices on the spot market that had spiked to historic highs, driven by high fuel prices and hot summer weather. Some businesses curtailed their operations because electricity and natural gas were too pricey.

But the flagging economy has resulted in a slump in demand that has jolted some energy markets. American Electric Power Co. and Southern Co., for example, both reported double-digit drops in industrial electricity use for the past quarter.

Meanwhile, natural gas, which strongly influences electricity prices, has fallen below $4 per million BTUs, or British thermal units. That’s down from $12 at last year’s peak.

For many businesses, the cost of electricity represents one of the few bright spots in a dismal economy. Andy Morgan, president of Pickard China Inc. in Antioch, Ill., which makes fine china, figures his electricity cost is down 30% to 40%.

Last year, when everything was spiking, he looked at different options — including negotiating a fixed-price contract for energy with a supplier. He says he held off and now he’s happy he did.

“We’ve definitely reaped savings,” says Mr. Morgan, adding that “especially in a down economy, you’ll take whatever you can get. That’s one of the few blessings during this storm.”

Slowdowns at major industrial companies such as Alcoa Inc. help account for the decline in electricity usage this year. The recession and drop in consumer demand for products that contain aluminum has caused the company to idle 20% of its smelting capacity world-wide this year.

In the U.S. the company has cut production at smelters, which are traditionally big energy users, in New York, Tennessee and Texas. Kevin Lowery, a company spokesman, said he did not believe that Alcoa has saved much money thus far because the company primarily purchases electricity through 25- to 35-year contracts.

Steel Dynamics Inc. is benefiting from lower pricing. The company operates five steel mills, with four purchasing electricity at spot market prices in Indiana, Virginia and West Virginia. The benefit, though, is smaller than it might be because the steelmaker is producing less steel this year.

“We’re producing fewer tons, but every ton we produce we seek to minimize the costs and electricity is one of those,” said Fred Warner, a company spokesman. Its mills are running at 50% capacity this year, down from 85% capacity last year.

Some wonder whether the deregulated markets of the Eastern U.S., Midwest, Texas and California will be especially hard hit if demand comes roaring back. That’s because utilities in these markets no longer are required to build new resources. It’s left up to the power generators to determine when the market conditions are ripe.

“There’s more supply than demand and prices are really low so it doesn’t make sense to build anything,” says John Shelk, president of the Electric Power Supply Association in Washington, D.C., a group that represents power generators.

Many electricity markets throughout the country have implemented demand reduction programs that give consumers a further incentive to reduce power use. The 13-state PJM Interconnection market has been one of the most aggressive — and has seen one of the steepest price drops.

A new report from the region’s official market monitor found a strong correlation between falling prices and an increase in demand-reduction programs. In the PJM market, energy users can collect money through an auction process for pledging to cut energy use in future periods.

In May, PJM conducted an auction to ensure it will have the resources it believes it will need in 2012-13. About 6% of the winning bids came from those who pledged to cut energy use by a total of 8,000 megawatts in that future period.

Our Perspective:

For those companies faced ith rising utility prices over the past 4 years, there is finally relief in the deregulated market. Prices have fallen due to the decrease in demand.

If you look at you electric bill over the past 12 months you will see that your price to compare for electric supply was most likely over .12 cents per kWh. Current market rates will allow you to lock you supply price in the dregulated market somewhere in the .10+ cent per kWh area. This could provide a 11/2 to 2 cents per kwh savings over the next year or two.

Our clients are finding substantial savings which fall to the bottomline.

Would you like to know more? Give us a call 856-857-1230 or email george@hbsadvantage.com . Contact us for a free evaluation You will be surprised by the savings it will provide.

—Timothy Aeppel, Sharon Terlep and Kris Maher contributed to this article.