Final costs for the Facility Managers Roundtable show that utility expenses rose significantly in 2005 and are increasing even more in 2006. Last year the median electric cost per gsf rose from $1.75 (2005 FMRT Report) to $1.89 (2006 FMRT Report). But this year’s report shows it isn’t just electricity that is responsible for the cost increases. Natural gas pricing rose significantly and even water and sewer charges increased faster than the inflation rate. The median cost for all utilities rose from $2.22 per gsf to $2.60 … a one year change of 17%.
Since utilities are almost always the largest single expense component for facilities. Facility Managers can have significant impacts on their operating costs by understanding how they are performing relative to others and what opportunities exist to reduce or control utility costs. The information you need to benchmark is the:
- Cost of utilities: electric, gas, water, sewer, steam, etc.
- Utility consumption rates
- Facility areas normalized by types of space since there are significant differences in utility consumption based on the function.
For more detailed explanation on how to collect these cost metrics see the May 2006 benchmarking article in FM Link.
Step 2 – How Do I Compare With Others…
Once this information is collected it is easy to normalize the data on a unit cost basis to determine how efficiently your utilities are utilized. Normalized electrical consumption charts in the Facility Managers Roundtable Group looks like this…
- Each bar on the chart represents a site’s annual consumption of kwh per factored gross square foot (FGSF).
- The median consumption is 22.55 KWH / FGSF
- Note how consistent the normalized data is for these participants. About 75 percent have reported a consumption of between 15 KWH / FGSF and 30 KWH / FGSF. There are only a few sites with very low or very consumption rates.
- Also, by comparing consumption rates we have eliminated regional differences in the cost of electricity.
Electricity normally represents the largest component of utility costs so this chart is an excellent starting point to compare against your site’s performance. One of the interesting and surprising changes is that the median consumption for electricity went up from 21.22 in 2005 to 22.55 in 2006. Now that isn’t a major change but we really expected the consumption to go down on a normalized basis. After all, there have been several changes that should have caused electricity consumption to go down: more efficient lighting, LCD computer screens, more energy efficient computers, energy efficient chillers, and so on.
You should evaluate consumption rate charts to develop your energy management strategies but your financial group will be interested in the cost comparisons. A useful chart for reporting to financial groups is the Total Cost of Utilities per Gross Square Foot.
- Each bar on the chart represents a site’s annual cost of utilities on a gross square foot (GSF) basis.
- The median consumption is $2.60 / GSF
- Note how consistent the normalized data is for these participants. About 75 percent have reported a consumption of between $1.75 / GSF and $3.50 / GSF. There are only a few sites with very low or very high costs and these are usually sites that have just started their benchmarking program.
Step 3 — Using This Information…
You’ve completed your utility data collection and performed the calculations. Here are a few questions you should ask yourself…
- Where do you stand on these charts? Are you above the median or below it?
- What type of projects would it take to reduce your consumption or at least maintain your current consumption rates.
- Could you explain to management why your positions on the charts is just right or needs to be changed?
- What are some of the reasons that explain your positions on the charts?
Step 4 — Some Best Practices…
- Understand your utility’s rate structure and billing process. Our benchmarking participants report that a detailed audit of their utility bills usually has an immediate payback.
- Look for improved technology to reduce your costs. More efficient lighting, installation of variable frequency drives, installation of energy efficient chillers, motion sensors for lighting, and high efficiency motors will reduce your costs.
- Energy costs are going up so projects that didn’t meet your corporate hurdle rates or rates of return may meet them now.
- Review the PM frequencies on your major equipment and adjust them as needed to improve performance.
Metrics from the Facility Managers Round Table (FMRT)
In 2006 there were 82 unique sites in the FMRT with a median size of about 1,450,000 million square feet.
