CC formed the Energy Conservation Program (ECP) in 1997 with the support of Minnesota Power, a major Midwest utility company.  ECP became a national energy engineering and conservation effort designed to help large energy consumers to become more energy efficient.  The unique program conducted energy audits, reviewed building conservation measures, and undertook the necessary construction planning and energy engineering improvements for cities, counties, universities, military bases, hospitals, and other large institutional and industrial complexes. Developed as a pilot program to provide comprehensive energy cost reduction technology services and financing for municipal governments who could ill-afford the expensive costs of retrofitting municipal buildings, the entire program could be implemented without the need for any state or local appropriation or other up-front financing.  New equipment, construction improvements and more could be provided FREE OF CHARGE.  ECP would get paid-back from the guaranteed energy savings.

Designed initially as a revolving loan fund, ECP had more than $25 million available to help cities become more energy efficient.  The program was implemented in two phases:

• Energy Acquisition Management 
This program provided an in-depth analysis of all utility billings and current energy acquisition procedures and made recommendations and/or implemented purchasing plans, when applicable, to reduce the cost of energy purchases.

• Energy Engineering Management 
This program provided both energy cost-reduction measures as well as energy production projects.  ECP would conduct a thorough review and evaluation and would develop a comprehensive cost-reduction program for client’s facilities. This could include new lighting, new heating or cooling systems, new insulation, etc.  All of these construction and equipment improvements could be installed and maintained at no cost to the city/customer.

Once the review process was complete, ECP would make every attempt to use local subcontractors for any construction/installation. If possible, ECP would also work with local vendors for any acquisition of new equipment that might be needed because ECP was not promoting any particular brand, make or model.  At the appropriate time, a local project manager(s) would also be employed to take over responsibilities of any on-site engineering management and supervision. In this way, ECP would not only save money and energy, but also create jobs and stimulate the local economy.

Independent Analysis is the Key

Too often, energy audits are conducted by large vendors or utility companies who are less interested in saving a city money and more interested in selling energy and expensive new equipment/services. A vendor’s solution to a problem is usually geared towards what he/she has to sell that month rather than how much money a city might save. As a result, utility overcharges are often overlooked and better scheduling and management are often ignored, especially when a local utility company is doing an energy audit of itself.  Obviously, there is a conflict of interest, so an independent analysis will always net the best results.

ECP is independent and specifically geared towards helping cities and other large institutional users. ECP is not selling anything. ECP only gets paid if the client saves money; that’s incentive!  As cities attempt to reinvent government, CC recommends that energy cost-savings be among their top priorities.  Energy use is one budget item that is painless to cut; in fact, saving energy can be a real pleasure.

How To Qualify

Participation in the program is limited.  Funds are dispensed on a first-come, first-serve basis.  To qualify, a city must:

1. Designate a person in the city’s general services or finance department who has access to utility billings and/or understands how this information is stored and collected as well as how it is organized and how it can be accessed.
2. Coordinate the number of contracting authorities within the city if more than one exists (e.g., airport authority, library authority, park & recreation department, schools, etc.)
3. Expedite the approval process for unsolicited proposals and professional services (i.e., ECP provides funding and therefore does not require a capital outlay, so cities are typically exempt from having to use competitive bidding to participate in the revolving loan fund).

 

APPA – Association of Higher Education Facilities Officers

APPA is a membership association of approximately 4,600 members, representing large institutional and industrial complexes, including but not limited to public and private schools, colleges and universities, hospital, military bases, and museums.  In 1997, APPA’s Executive Director, Wayne Leroy, initiated a joint program with ECP for utility cost reduction and energy conservation management services to help reduce the cost of unregulated utilities for APPA’s members.  Through the U.S. Department of Energy’s Rebuild America Program and its Coalition of Community Partnerships, ECP made its program and attractive revolving loan fund available to a number of membership associations in the Washington, DC area (e.g., USCM, ICMA, NLC, NACo, SCI, etc.), but APPA wanted to market ECPs services directly to its membership and form its own APPA program.

 

In 2005, Capital Consultants partnered with ECM – an energy engineering firm in Boston, Massachusetts – to change the way large companies and institutions buy energy.

ECM specializes in energy Engineering Innovations; CC specializes in energy Management Innovations, especially for U.S. Government agencies, private companies, universities, non-profit organizations and large membership associations.  Together, CC and ECM are able to convince large energy users to adopt Engineering Management Innovations to save energy, save money and, in the process, save the environment.

One of the most popular innovations CC and ECM have introduced is getting large energy users to buy electricity wholesale – directly off the grid – rather than paying more expensive retail rates; essentially making them their own utility companies.

How We Teamed Up

CC and ECM both represented Sempra Energy – California’s largest utility company – to encourage large energy users to purchase Sempra’s more lucrative, long-term retail contracts and avoid fluctuating market rates.   However, it didn’t take long for CC’s founder, Michael Kaiser, and ECM’s founder, Eugene Garcia, to realize by teaming-up they could offer customers even more lucrative wholesale contracts.   To do this they needed to find a way to provide the necessary backroom energy services needed to purchase electricity wholesale, directly off the grid, and bypass the utility companies altogether as unnecessary middlemen.

CC and ECM found an immediate side-benefit to making large energy-users responsible for their own energy purchasing was that they also became much more interested in adopting energy conservation measures, such as solar rooftops, wind energy, geothermal, etc.   Anything to save them money!

America’s Conflict of Interest

As it is now, we rely largely on private utility companies to promote energy conservation in America.   Unfortunately, there is an inherent conflict of interest in this approach because utility companies get paid based on the amount of energy used, not on the amount of energy saved!   To achieve any real energy savings in America we therefore need to adopt a paradigm shift and make those responsible for using energy also responsible for saving energy, bypassing the middleman entirely.

Taking conservation out of the hands of those who profit from energy use and putting it directly into the hands of those who pay for it not only generates immediate energy savings for customers, but as ECM and CC have proven, it also results in more conservation measures, creating the kinds of dramatic breakthroughs in new innovations and new technologies that President Obama and so many Members of Congress hope for.  However, it is essential Members of Congress realize it is how we manage the nation’s energy sector that is to blame for the lack of innovation and interest in new conservation measures and technologies, not consumers.   Americans want to save energy because Americans want to save money, so it’s how we approach the problem and the role of middlemen that become more of a hindrance than a help.

Of course the same could be said for other conflicts of interest in the American economy.  For example, expecting oil and gas companies or automobile manufacturers to be responsible for better gas mileage or replacing large, expensive internal combustion engines with electrics when it is the companies themselves who benefit from those large engines and poor gas mileage.   Why should oil and gas companies or automobile manufacturers introduce electrics, hydrogen powered cars, or more efficient hybrids when it cuts their profits and revenues?

As long as we rely on those who benefit from the status quo to also be responsible for changing the status quo we will never see the kinds of dramatic breakthroughs in new technologies and innovation beyond what U.S. Government regulations alone require.   Nevertheless, if Americans  were to adopt the same kind of paradigm shift in the oil, gas, auto, and other government regulated sectors that CC and ECM have introduced in the electricity sector, we might just see the kinds of dramatic breakthroughs Washington is hoping for, and, in the process, save American consumers a lot of money!

___________________________________________________________

“As long as we rely on those who benefit from the status quo

to also be responsible for changing the status quo,

we will never see the kinds of dramatic breakthroughs

in new technologies and innovations

beyond what U.S. Government regulations alone require.”

________________________________________________

 

Conclusion

Relying on government regulations alone will never accomplish more than incremental improvements in sectors of the economy regulated by the government because what the government is asking corporations to do is simply contrary to their underlying motives; that is, to generate higher profits.   We must instead rely on market forces to drive corporate decision making if we expect to inspire the kind of new technologies and innovations Washington hopes for.

Related excerpts from a 2009 lecture at Emory University

“As long as we are content to put the fox in charge of guarding the hen house, it is unrealistic for us to expect to see any dramatic breakthroughs in hen production or egg production; in fact, just the opposite.   So, rather than trying to enforce regulations on how many chickens the fox is allowed to eat, why not instead acknowledge we are asking the fox to do something that is not in his nature?  Get rid of the damn fox already!  Put a rooster in charge of guarding the hen house, then you will not only see more hens, but more eggs and create some new revenue streams on the farm.   That’s the economic model President Obama and so many Members of Congress are looking for today when they speak of the tremendous potential in America’s energy sector.  But unless we change our approach, we will never get there.

Of course the same could be said for other sectors of the economy, like the healthcare sector or American banking sector or any number of other government regulated sectors in the economy.  We tend to allow the foxes to be in charge of guarding or managing the hen house and then wonder why that sector hasn’t reach its full potential or why it becomes corrupt.   Meanwhile, the government is forever trying to play catch-up by introducing more and more new regulations to protect consumers, but government will always be one-step behind because of its stifling bureaucracy and crippling politics.  Government will never be able to compete with the private sector; a basic TRUTH some in Washington refuse to accept. 

The reality is we rely too much on government regulations and not enough on fair market forces.  Understand, there is a difference between free market and fair market forces.  Free market forces inevitably become corrupt and ultimately require government regulations/interventions.  Left to their own devices, businesses inevitably become corrupt because they are driven by profits and greed.   A great example of this can be found in America’s banking sector recently.   However, by having fair market forces, with limited regulations and instead relying on end-users to generate market demands rather than those selling the products, Americans can expect to see much greater results for both consumers and for the overall economy through the creation of new technologies and innovations. 

So recognize the nature of the beast and stop tempting the foxes by putting them in charge of guarding America’s hen house.   There are too-damn-many scared hens running around the American farm already!”

2009 lecture remarks by CC’s Founder and President, Michael Kaiser

________________________________________________________________

EXAMPLE

A Draft Proposal to

_Xxxxxxxxxx

for

_{XxxxxxxxxxPower}

 

PURPOSE: To create a full-service energy company inside Xxxxxxx capable of buying energy wholesale and selling back retail to Xxxxxxx’s own office/hotel properties.  It is estimated such a company could generate a minimum $100 million a year when fully implemented.

 

HOW:         Given the enormous assets and purchasing power of Xxxxxxx  Real Estate, a dedicated power company could buy energy off the grid and sell back to itself, creating a new revenue stream inside Xxxxxxx, benefiting Xxxxxxx as well as Xxxxxxx’s tenants so they too can enjoy the margins currently enjoyed by utility companies and retail energy providers. 

 

WHY:      In the last decade, the energy industry has become de- centralized from full-service power companies to three primary lines of energy businesses: (1) production/generation; (2) transmission; and (3) sales/marketing.   Traditional full-service power companies have become increasingly scarce as companies such as Allegheny Power, Duke Power, Florida Power, etc., all specialize in one of the three primary business sectors.  Deregulation has also made it possible for large companies like Xxxxxxx to negotiate reduced retail prices from power providers in several states.  What we propose is to take this one-step further (i.e., Buy Wholesale).  In addition, Xxxxxxx would benefit from the tax breaks and incentive packages currently being offered at all levels of government to help utility companies reduce energy demand as well as consumption on transmission grids (i.e., reducing the likelihood of Brown-outs).  Finally, the tremendous improvements in technology and engineering have made it much more attractive to upgrade and retrofit buildings using conservation measures to lower energy consumption (i.e., Going Green). 

 

WHEN:      We propose to immediately create a new company inside Xxxxxxx (i.e., XxxxxxPower), which would include a full range of energy services, but most importantly, would buy energy wholesale and sell-back retail to Xxxxxxx’s own properties.  As mentioned, in addition to creating a new revenue stream for Xxxxxxx’s Real Estate division, this would also lower utility prices for Xxxxxxx’s customers/tenants and could even be used as a sales/leasing marketing tool.  Although the power industry may be consolidating within the three primary business sectors, xxxxxxx’s secure customer base makes it possible for Xxxxxxx to not only buy and sell energy, but become its own full-service energy company, taking advantage of these tax advantages, conservation packages, as well as the latest in technology and infrastructure improvements. Xxxxxxx would even be in a position to offer financing (shared-savings programs) to tenants as well as to other governmental and non-governmental institutions in these same “Xxxxxxx Communities” who would benefit from Xxxxxxx’s ability to finance energy improvements off balance sheet (i.e., innovative shared-savings programs financing energy improvements for schools, hospitals and other non-profit organizations that might not otherwise be able to afford new conservation measures/technologies). So a Xxxxxxx-backed power company could finance energy improvements off balance sheet and be paid-back through the guaranteed energy savings, creating yet another revenue stream for Xxxxxxx.  Finally, this new energy business would have the added benefit of making Xxxxxxx’s properties more attractive for resale and leasing by having discounted energy and more energy efficient buildings, making happier tenants who are able to buy energy below market rates and enjoy lower utility bills.

 

WHERE:      We propose to build this full-service power company inside Xxxxxxx with the help of some of the best names in the business (e.g., Trane, Sempra, ECM, etc.).  So rather than selling retail energy, new equipment or engineering services to Xxxxxxx, we are proposing a business strategy as strategic partners, not vendors.  In short, Xxxxxxx would own the business and reap the rewards currently enjoyed by the middlemen (i.e., utility companies, retail energy providers, equipment vendors, energy engineering firms, etc.).  

 

BENEFITS: 

–Lowers up-front utility costs for Xxxxxxx Real Estate.

–Creates new revenue streams for Xxxxxxx.

–Takes advantage of tax benefits/incentives offered by federal, state and local governments.

–Makes Xxxxxxx’s properties more attractive for leasing and resale.

–Lowers energy costs for Xxxxxxx’s customers/tenants.

–Provides financing options for tenants and possibly even non-Xxxxxxx customers (e.g., local hospitals, schools, etc.).

–Reduces demand on the power grid; benefiting the environment.

–Provides positive PR/government relations at a time when private equity firms and commercial real estate firms could use help on Capitol Hill.

 

CONTACTS:    Michael Kaiser or Eugene Garcia: (202) 745-2900

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