Energy management is the proactive, organized, and systematic coordination of energy data, procurement, distribution, and use of energy to meet facility requirements, taking into account environmental and economic objectives.
The benefits of an energy management system include significant energy cost savings, more robust and reliable energy usage data, and the ability to make informed, strategic decisions regarding energy requirements and consumption.
At Clark Hill, we understand that effective energy management is a process that includes identifying a system that best meets a company’s needs, negotiating strong, enforceable agreements between the client and vendor, and using the information gathered to achieve energy efficiency, procurement, self-generation, and other goals. Our highly experienced energy team offers a unique consulting service that combines the expertise of highly regarded energy management professionals along with the targeted legal counsel of our energy and utility law attorneys. This allows us to provide the client with true end-to-end energy management advice.
Energy Data Management: System Identification and Vendor Agreements
Understanding energy usage and spend is a core objective of energy management. We can help clients identify the best system for gathering utility, energy supplier, and usage information. Rather than implementing or managing systems in house, many companies use or are looking to use the expertise and resources of third-party providers. We can assist clients with the selection of an appropriate system and/or provider to meet their specific needs. Once systems and vendors have been identified, we perform a detailed legal and commercial review of relevant agreements to help protect our clients, their investments, and their valuable information.
Energy Procurement Consulting
Energy markets continue to evolve and provide an increasingly broad range of energy procurement opportunities. However, along with opportunities come complexities – and potential risks. We help clients analyze and address the full spectrum of issues, including:
- Electricity, natural gas, and other commodity-specific issues such as:
- Procurement in an open market/retail choice
- Supplier identification and evaluation
- Contract review and negotiation
- RFP process
- Market monitoring and reporting
- Regulated and monopoly utility supply
- Utility tariff analysis and optimization
- Leverage building, including involvement/persistence, bypass, user groups, and political pressure
- Utility negotiation and special contracts
- Transportation and delivery optimization
- Miscellaneous issues
- Ancillary services
- Utility and energy supply tax evaluation and optimization
- Procurement in an open market/retail choice
Our energy management team can provide extensive assistance to support the procurement of electricity and natural gas. We routinely:
- Review a facility’s past utility invoices, such as the past 12 months of usage, to determine volume needs and usage patterns. For new facilities, we assist with developing meaningful usage projections.
- Review current facility energy agreements across facilities and service territories. If purchasing is for a series of facilities, we help determine the viability of and path toward a combined purchasing strategy.
- Review supplier backgrounds and creditworthiness.
- Perform analyses of existing utility tariffs and explain details of current rates, rules, and obligations. For example, industrial customers run into problems with sharing or providing electricity to fence-line facilities, such as third-party industrial gas facilities, because they do not fully understand complex utility tariff rules.
- Identify relevant tariff rates and research a facility’s options, either as a customer of the utility or with a third-party energy marketer.
- Determine options for forming an energy-buying consortium to aggregate interests with others who are similarly situated.
- Negotiate with the utility and determine if there are special rates or programs that the facility could access that would save money or provide it with longer-term rate stability.
- Evaluate commercial and legal ability for utility natural gas bypass.
- Perform utility tax evaluations and optimization reviews, drawing on our expertise in state tax laws, available exemptions, and negotiation of new tax exemptions or credits.
- Negotiate electricity and natural gas relationships and provide continuing support going forward.
Renewable Energy Supply
Many companies are actively looking for better ways to procure renewable energy through direct access to suppliers or improved utility renewable supply tariff rates. Incorporation of a renewable component to an overall energy management plan is a sophisticated effort and requires appropriate, coordinated support to ensure that all components of the overall plan will work together. Our energy management team:
- Assists with a review of the business case for a renewable project. Due diligence is critical, particularly concerning existing federal tax credits or incentives, as well as any state programs, credits, or incentives.
- Reviews existing utility renewable energy supply tariffs and negotiates new options.
- Provides commercial and legal review of physical supply agreements and contracts for differences, purchase of renewable credits, etc.
Behind the Meter Generation / Self-Generation
One of the best ways to take control of energy costs is through the utilization of behind-the-meter or self-generation opportunities. However, for most energy users, power generation is not a core business or area of expertise. Our energy management team partners with clients to:
- Assist with achieving PURPA designation for co-generation facilities.
- Review existing standby utility tariff rates to understand terms, conditions, and costs, and negotiate new standby rates.
- Perform environmental due diligence and pursue permit applications.
- Review utility and transmission system interconnection agreements.
- Perform commercial and legal reviews of major equipment purchase agreements and third-party service agreements.
- Assist with fuel-purchase strategy and supply contract negotiation.
Energy Supply Risk Analysis and Mitigation
There are many key risk elements associated with energy supply that, drawing on an effective energy management system, can and must be evaluated and mitigated. These include:
- Physical supply and delivery risks
- Points of equipment ownership transition, particularly from utility to customer
- Equipment ratings, emergency load-shedding procedures, redundancy and backup, common modes of failure for redundant systems, etc.
- Maintenance and inspection programs
- Contractual and cost risks
- Firm vs. interruptible, liquidated damages, replacement supply provisions, force majeure liability, etc.
- Financial hedging
- Fixed-price vs. floating-price contracts
Our energy management team has extensive experience in risk analysis and mitigation. We regularly:
- Ensure that contractual and cost-risk items are addressed in the energy supply contracts.
- Perform a legal review of trading agreements and, for companies using financial hedging instruments, assist with establishing a hedging strategy.
- Help clients mitigate physical supply and delivery risks through a review of existing and establishing new facilities agreements with the utility or supplier.
Energy Efficiency Demand-Response Analysis
Another core element of an energy management program is the evaluation and optimization of energy usage. Effective energy efficiency and demand response can result in significant operational improvements and cost reductions. The attorneys and advisors of our energy management team work with clients to:
- Review existing and negotiate new energy efficiency and demand-response programs offered by the utility.
- Provide counsel on Energy Service Provider Company (ESCO) agreements, including terms and conditions, liability, measurement, and verification, etc.
- Conduct commercial and legal reviews of demand-response contracts with aggregation companies.