Saving Millions on Your Energy Costs

1
Saving Millions on Your Energy Costs

• Workshop K 315 430 PM
• September 19, 2007
• 2nd Annual Northern Ohio Energy Management
  Conference

• www.BrakeyConsulting.com/presentations

2
Presentation Outline
I. 112 Years of History in 112 Seconds
II. External Opportunities and Threats
a) Buddy, can you spare a match? (Driving forces
behind change)
b) Natural gas markets
c) Electric competition
III. Internal Opportunities Low cost ideas for
big energy savings
IV. Peeking at Possible 2009 Electric Rates
V. ReadyFireAim?
3
November 6, 1895
The Company was incorporated as the
Udall-Shellito Company to manufacture wooden
pails.
4
September 6, 1898
The Companys name was changed to the Ohio Pail
Company.
5
At the turn of the century Ohio Pail Company
generated electricity for their own equipment and
the local Middlefield community.
6
Ohio Pail after the 1920 reconstruction
7
Johnson Rubber 1962
8
The Companys name was changed to The Johnson
Rubber Company (JR), reflecting its shift from
steel pails to becoming a manufacturer of a wide
variety of rubber products. The Company exited
the steel pail business.
9
Johnson Rubber continues to run very intensive
energy manufacturing equipment
Electric Extruders Microwaves
Electric Mixers
Middlefield Campus
CEI EOG Territory
Electric and Steam Molded Presses
Electric Injection
10
In the early 1980s Johnson Rubber was consuming
close to 20 BILLION Btus of energy per month.
11
If we couldnt find a way to squeeze
energy waste and cost out of our manufacturing
processes we would we be destined to the same
fate as some of our local competitors
12
October 18, 1981
13
Out-of-control energy costs in 1981, drove a
large number of manufacturing companies out of
business in northeast Ohio.
In 1982, JR assigned two young engineers to begin
attacking this growing threat to the companys
future.
Over the following two decades, Mike Brakey and
Steve Metheny helped JR saved tens of millions of
energy dollars, and weather the energy hikes and
economic recessions of the 1980s and 1990s.
In this workshop, we examine energy strategies
and review real life energy saving projects that
can help your company better control its energy
costs because...
established companies still continue to fall
around us
14
Creative Engineered Products Middlefield
December 16, 2006
700 Ohio jobs to be lost!
15
Energy Cost Reduction Program
The diamonds in the rough!
16
External Opportunities Threats

• Lowering your Btu cost of energy
• The natural gas market
• The electric market
• Active energy associations (IEU-Ohio,
  OMA, MICA)

17
Internal Opportunities

• Energy conservation
• Energy consideration in capital equipment
  procurement
• Energy recovery recycling
• Electric Vs. natural gas
• Demand load shedding
• Improved scheduling

18
Buddy, can you spare a match?
Dynamics of the natural gas and electric market
over the last decade
19
What is 20 Billion Btus of energy?
Lets go back to 1996, the first year of MEC
Energy Conferences
With 1996 prices we had
20 Billion wooden matches
56,000,000
5,860,000 kilowatts
500,000
With CEI Nov. 1996 rate increase
19,250 MCF gas
67,000
1 Kitchen Match 1 Btu 1 Kilowatt-hour
3,413 Matches 1 MCF 1,039,000 Matches
750 Matches _at_ 2.10/box 0.0853/KWH _at_
Load Factor 59 Natural Gas _at_3.50/Mcf
2,800 per mmBtu
25.00 per mmBtu 3.30
per mmBtu
20
What is 20 Billion Btus of energy?
Where are we today with the 2nd energy conference
in 2007?
With January 2007 prices we have
20 Billion wooden matches
56,000,000
5,860,000 kilowatts
500,000
515,000
19,250 MCF gas
67,000
1 Kitchen Match 1 Btu 1 Kilowatt-hour
3,413 Matches 1 MCF 1,039,000 Matches
750 Matches _at_ 2.10/box 0.0853/KWH _at_
Load Factor 59 Natural Gas _at_3.50/Mcf
2,800 per mmBtu
25.00 per mmBtu 3.30
per mmBtu
21
Natural Gas
Energy drivers today
Natural gas prices have fallen 50 from their
highs
Electric prices might skyrocket once Ohios Rate
Stabilization Plan (RSP) expires at the end of
2008.
22
Lessons from recent energy events
Begin taking control of manufacturing energy
costs by understanding energy basics

• How do local electric utilities reward businesses
  for improved energy practices?
• How do we try to better manage natural gas
  volatility?

23
NYMEX Natural Gas Contract Watch
Why do you need a good marketer to work on your
companys behalf?
I expect natural gas prices to continue to be
volatile.
24

• NYMEX prices are released for future natural gas
  contract purchases daily.
• Johnson Rubber works closely with marketers to
  hedge against future volatile prices.

25
NYMEX Natural Gas Contract Watch
Many marketers can help clients lock up contract
prices for multiple years but only if the timing
is right!
13 months later
26
NYMEX Natural Gas Contract Watch
Many marketers can help clients lock up contract
prices for multiple years but only if the timing
is right!
September, 2007 future
27
How do we better manage natural gas volatility?
Good marketers will help you identify savings
opportunities!
28
Electricity
After deregulation began in 2001, the PUCO no
longer received comparative electrical data from
the public utilities.
Unfortunately, it remains important for us to
know how competitive our local electric rates are
against other Ohio regions and the nation as a
whole!
It is no easy challenge to keep up on competitive
rates today!
29
Bundled Rates Prior to 2001
30
Summer
Winter
Bundled Rates
CEI bundled rates, prior to 2001, might look
Greek but could still be deciphered with hand
calculator.
31
Summer
Winter
Bundled Rates
Between January 1, 2001 and December 31, 2005, we
went through the market development period and
rates became more even more complicated.
32
There can be over 250 RESIDENTIAL billing
calculations under FirstEnergy.
33
Bundled Rates
Between now and December 31, 2008, we are under
the Rate Stabilization Plan (RSP) and the Rate
Certainty Plan (RCP).
Though this benefits customers, electric bills
have become even more complicated to analyze.
34
Now there can be more than 400 billing
calculations under any given rate schedule.
35
How competitive are we against other Ohioans?
36
How competitive are we against other U.S. states?
New Slide
37
How competitive are we against other U.S. states?
What is happening to electric competition within
Ohio state borders?

• www.BrakeyConsulting.com/presentations

Added Slides
38
2000

• List of 170 commercial electric rates for
  smaller companies
• 3 years after the freeze, Ohio Edison commercial
  ranking fell from top 10 to 25th

Slides from 2004
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2001

• Ohio Edison had dropped to the 64th most
  expensive industrial electric rate for larger
  companies

41

• Ohio Edison rates remained frozen
• 54 other utilities now had higher commercial
  rates

42
How competitive are we against other U.S. states?
What has been happening to electric competition
outside our Ohio state borders since 2004?
National Example 400,000
KWH/month 1,000 KWD peak demand 56 load
factor
43
How competitive are we?
Below is data from a MICA member with 400,000 KWH
and 1,000 KWD
56 load factor reflects a 5½ day - 2 shift
operation
Interval meter data (MeterProfile.com)
44
Under CEIs Large General Service
400,000 KWH, 1,000 KWD (56 Load Factor)
What is happening to generation elsewhere?
Generation 4.77
Apples-to-Apples 7.81
Stranded 3.04
Balance 1.96
45
Status of Competition September 7, 2006 Kenneth
Rose, Ph.D. Consultant
Senior Fellow Institute of Public Utilities
http//www.ipu.msu.edu
Generation prices in deregulated states
46
How competitive are we against other U.S. States?
9.6 to 11 per KWH just for the generation part
of the bill!
Status of Competition September 7, 2006 Kenneth
Rose, Ph.D. Consultant
Senior Fellow Institute of Public Utilities
http//www.ipu.msu.edu
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136 locations across U.S.
Added Slide
48
How competitive are we against 136 U.S. sites?
49
How competitive are we against other U.S. states?
50
How competitive are we against other U.S. states?
The good news is
FirstEnergy rates have been frozen since 1996 and
will continue to be frozen for another 15 months!
As electric costs continue to rise elsewhere, we
grow more competitive each month against the rest
of the U.S.
Ohio Power, Columbus Southern Power, Dayton
Power Light and DUKE have rate increases
approved within their RSPs.
51
How competitive are we against other U.S. states?
The bad news is
FirstEnergys Rate Stabilization Plan (RSP) is
scheduled to end January 1, 2009
What is happening in states boarding Ohio?
Added Slide
52
How competitive are we against other U.S. states?
MICH.
PA.
OH.
IND.
W.VA.
- Ohio has kWh advantage over Pennsylvania
Retail Access repelled

• Ohio is slightly less competitive than
• Indiana Michigan

KY.

• Ohio is less competitive than Kentucky
• and West Virginia

53
How competitive are we against other U.S. states?
The bad news is
If Ohio electric rates jump in 2009
Kentucky, West Virginia and Indiana will become
more attractive to business over Ohio
Have you taken any action to reduce energy
consumption and increase productivity?
The clock is ticking. You have less than 15
months to identify opportunities and get control
of your energy costs!
54
Did you know?
Electricity
One-quarter to one-half of most local electrical
billing charges are comprised of missed
opportunities.
Gold nuggets have been buried within the rate
schedules to encourage good energy practices.
Where are these gold nuggets now that we know it
is more urgent than ever to capture them at your
facility?
Return to Example 400,000
KWH/month 1,000 KWD peak demand
55
How competitive are you against other Ohioans?
56
How competitive are you against 134 cities across
the United States?
At 9.77/KWH we would rank 93rd out of 134 U.S.
cities.
57
Internal Opportunities at Johnson Rubber

• Energy conservation
• Energy consideration in capital equipment
  procurement
• Energy recovery recycling
• Electric Vs. natural gas
• Demand load shedding
• Improved scheduling

58
How competitive are we against others?
Interval meter data at Johnson Rubber
6½ day - 3 shift operation 75 Load factor
5½ day - 2½ shift operation 55 Load factor
129,356 (9.33/KWH)
105,563 (7.62/KWH)
Annual savings of 285,520 from improved
scheduling.
59
How competitive is JR against other Ohioans?
7.62 / kWH
We know what we would pay in Ohio for any given
electrical profile.
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Other low cost ideas for big energy savings
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Low Cost Ideas for Big Energy Savings
25,000/Year recovered in billing errors.
More vendors means more complications!

• Billing Audits

Local Delivery Charges - FirstEnergy
3rd Transmission MISO/PJM
No longer a single vendor for electricity!
3rd Party Generation FES?
62
Low Cost Ideas for Big Energy Savings
336,000/Year billing cost avoidance
Are you in the optimum rate schedule?
63
Low Cost Ideas for Big Energy Savings

• Billing Audits
• 3,000 gallon condensation tank (1982)

15,000/Year Savings
64
Low Cost Ideas for Big Energy Savings

• Billing Audits
• 3000 gallon condensation tank
• Boilers (Ohio Specials) 14 -gt7 (1982)

140,000/Year Savings
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Low Cost Ideas for Big Energy Savings

• Billing Audits
• 3,000 gallon condensation tank
• Boilers (Ohio Specials) 14 -gt7
• Conjunctive Electric Billing
• Economizers
• CimDor Vs Competitor (1982)

95,000/Year Savings
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Low Cost Ideas for Big Energy Savings

• CimDor Vs Competitor

99,000/Year Savings
The competitors system would have added 96,360
KWH and 220 KWD to monthly electric billing for
last 24 years.
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Low Cost Ideas for Big Energy Savings

• Billing Audits
• 3,000 gallon condensation tank
• Boilers (Ohio Specials) 14 -gt7
• Conjunctive Electric Billing
• Economizers
• CimDor Vs Competitor
• Dept A press insulation (1983)
  Transit Vs Glasstherm

35,000/Year Savings
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Low Cost Ideas for Big Energy Savings

• Billing Audits
• 8,000 gallon condensation tank
• Conjunctive Electric Billing
• Economizers
• CimDor Vs Competitor
• Dept A press insulation
• Brokerage Gas
• Dept D gas fired hot oil
• Boilers (Ohio Specials) 13 -gt7 -gt 5

Overhead condensate steam pipe reduction plus
Boiler Controls (1990)
40,000/Year Savings
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A Case Study Controlling the Natural Gas Used
by Your Boiler
The standard firing controller on a natural gas
boiler is a pressure controller. It has a small
variable resistor coil and needle inside. When
the coil burns out, the boiler defaults to high,
continuous fire.
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A Case Study Controlling the Natural Gas Used
by Your Boiler
Many boiler operators complain that pressure
controllers, mounted on top of the boiler near
the water column, are unreliable and difficult to
repair or replace.
Due to high temperatures on the boiler exterior
walls, it is difficult to climb onto them to
detect and repair a failed pressure controller.
When a failed resistor coil goes undetected over
time, excess natural gas is burned. Increasing
steam pressure will eventually lead to a boiler
shutdown.
71
A Case Study Controlling the Natural Gas Used
by Your Boiler
An idea for solving this problem came from a
natural gas-fired Fulton hot oil unit, which was
brought in for the earlier energy savings
project. The Fulton system was controlled by
temperature instead of pressure.
After
carefully weighing the pros
and cons of each system,
maintenance spent 500 to convert one of the Ohio
Special boilers from pressure to temperature
controls.
A thermocouple was installed in the steam chest
of the boiler. The thermocouple delivers a signal
to the temperature controller. The temperature
controller, in turn, sends a 4 to 20 milliamp
signal to the modulating motor which controls the
firing rate of the burner. The burner is hooked
up to the linkage that controls the natural gas
and air mixture.
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A Case Study Controlling the Natural Gas Used
by Your Boiler
This was so successful that all the remaining
North American boilers were converted over to
temperature controllers.
Over the last eighteen years, this has proven to
be a reliable and cost-saving approach to boiler
control.
With the high cost of maintenance and
skyrocketing natural gas prices, this is one of
many steps that can be taken to lower operating
costs in manufacturing while improving quality
and reliability.
73
Low Cost Ideas for Big Energy Savings

• Billing Audits
• 8,000 gallon condensation tank
• Boilers (Ohio Specials) 13 -gt7
• Conjunctive Electric Billing
• Economizers
• CimDor Vs Competitor
• Dept A press insulation
• Brokerage Gas
• Dept D gas fired hot oil
• Load shifting of rubber mixers (1986)

90,000/Year Savings
74
Demand load shedding of highest peaks, seen only
a few hours each month, eliminates 300 KWD from
the electric bill.
Data from FirstEnergy Interval Metering
75
Low Cost Ideas for Big Energy Savings

• Demand Load Shedding

106,500/Year Savings
By turning on/off light signals, mixing
operators reduced peak demand by 300 KWD during
day shift.
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Low Cost Ideas for Big Energy Savings

• Billing Audits
• 8,000 gallon condensation tank
• Boilers (Ohio Specials) 13 -gt7
• Conjunctive Electric Billing
• CimDor Vs Competitor
• Chillers Vs Cooling Towers

33,000/Year Savings
320 ton chillers with 4
compressors 50 loading
during winter or
77
Low Cost Ideas for Big Energy Savings

• Chiller Vs. Cooling Tower

33,000/Half Year Savings
During 600 hour cold months cooling towers drop
demand 136 KWD and drop KWH 81,600.
78
Low Cost Ideas for Big Energy Savings

• Cooling Tower tips

33,000/Year Savings
Variable speed drive on fan further reduces power
and improves quality
Same day neighbors cooling tower next door to JR
79
Low Cost Ideas for Big Energy Savings

• Variable drive tips

33,000/Year Savings
Variable speed drive on fans costs about 2,000
and is highly recommended.
80
Low Cost Ideas for Big Energy Savings
Greater Energy Savings in the New Millennium

• Billing Audits
• 8,000 gallon condensation tank
• Boilers (Ohio Specials) 13gt7gt5
• Conjunctive Electric Billing
• Economizers

43,000/Year Savings
Cross roads 2002
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Low Cost Ideas for Big Energy Savings
Greater Energy Savings in the New Millennium
Was Johnson Rubber to be a victim of its own
energy management success? Effective energy
insulation, improved technology and conservation
programs had eliminated much of the waste heat
off the manufacturing equipment.
Now it was less comfortable for employees because
the ancillary heat from the manufacturing
equipment had been eliminated.
82
Low Cost Ideas for Big Energy Savings
Greater Energy Savings in the New Millennium
Was Johnson Rubber to be a victim of its own
energy management success? Effective energy
insulation and conservation programs had
eliminated much of the waste heat off the
manufacturing equipment. Now it was less
comfortable for employees because the ancillary
heat from the manufacturing equipment had been
eliminated.
This lead to several additional challenges as
natural gas prices rose

• Steam heaters could not offset waste heat
  reduction. JR must consider doubling the number
  of steam heaters from 40 to 80 to attempt to meet
  the space heating needs of employees plant-wide.
• During the coldest winter month, this company
  needed another 200 HP boiler just to meet its
  maximum steam demands for manufacturing processes.

83
Low Cost Ideas for Big Energy Savings
Greater Energy Savings in the New Millennium
The high capital outlay of several additional
boilers, piping and steam heaters caused the
company to consider alternatives. Ultimately
Johnson Rubber eliminated plant steam heaters and
substituted gas-fired infrared space heating
throughout the plant. In this high ceiling
environment, infrared heaters were far more
efficient than steam heaters.
Another benefit of the use of infrared space
heaters was that the company was able to reduce
the steam demand by non-production equipment.
Thus, there was sufficient steam from the
existing boilers for manufacturing, even on the
coldest winter day, and the need to purchase
another boiler was eliminated.
84
Low Cost Ideas for Big Energy Savings
Greater Energy Savings in the New Millennium
Natural Gas consumption (1980-2006)
Mcf
Remember earlier I said work on conservation?
JR has hedged its volatility to natural gas
spikes, even though it is still a major concern.
85
Low Cost Ideas for Big Energy Savings
Greater Energy Savings in the New Millennium

• Power Factor (pf)

KWD
Billed KVA
pf
(Under some utilities)
86
If we received a quote of 100,000 for capacitors
to improve power factor from 80 to 99 (19
points), what would the simple payback be?
6 month simple payback!
capacitors
87
If we received a quote of 100,000 for capacitors
to improve power factor from 80 to 99 (19
points), what would the simple payback be?
No Change
No Change
6 months simple payback!
No Change
capacitors
88
Future Lighting opportunities
Rule of Thumb
Manufacturing facilities 15 of total
electrical loading
Commercial office buildings 51 of total
electrical loading
We continue to experiment and analyze to achieve
the biggest bang for the buck!
89
Energy is typically one of the top three
variables that impact the overall success of a
company
Material 1
Recent volatile cost of natural gas coupled with
looming electric rate increases towards the end
of this decade has made energy an ever growing
factor!
Human Resources 2
Energy 3
90
Part IV
Peeking at Possible 2009 Electric Rates
Includes a proposed major overhaul of FirstEnergy
distribution tariffs for 2009
91
The Illuminating Company

• Residential Service
• Secondary Service
• Primary Service
• Subtransmission Service
• Transmission Service

92
Ohio Edison

• Residential Service
• Secondary Service
• Primary Service
• Subtransmission Service
• Transmission Service

93
Toledo Edison

• Residential Service
• Secondary Service
• Primary Service
• Subtransmission Service
• Transmission Service

94
Proposed Rate Schedule Requirements for General
Service

• Secondary Service
• Customer accepts power at 600 volts or less
• Primary Service
• Customer accepts power at over 600 volts but less
  than the volts required for Subtransmission
• Subtransmission Service
• Customer owns the substation
• Customer accepts power at over 11,000 volts for
  IC or 23,000 volts for OE TE and less than
  69,000 volts
• Transmission Service
• Customer owns the substation
• Customer accepts power at 69,000 volts or more

95
Under deregulation, FirstEnergy will only provide
delivery services
Others
Liberty Power
96
Open market generation prices will impact total
electric costs

• FirstEnergys PennPower set 2007 POLR (Provider
  of Last Resort) generation prices for customers
  who choose to buy electricity from the utility

97
Remember from an earlier slide we had
Interval meter data at Johnson Rubber
6½ day - 3 shift operation 75 Load factor
5½ day - 2½ shift operation 55 Load factor
129,356 (9.33/KWH)
105,563 (7.62/KWH)
Annual savings of 285,520 from improved
scheduling.
98
Electric bill profile
Present rates Vs. 2009
Distribution Increased Generation Unchanged MISO
Unchanged
Distribution Increased Penn Power 8.73/KWH MISO
Unchanged
Secondary (600 volts and under)
7.62/KWH
Weighted average of seasonal rates when applicable
99
Electric bill profile
Present rates Vs. 2009
Distribution Increased Generation Unchanged MISO
Unchanged
Distribution Increased Penn Power 8.73/KWH MISO
Unchanged
Secondary (600 volts and under)
7.62/KWH
New proposed rider would forgive 1.5 per KWH for
these special rates in 2009 to soften impact.
100
Electric bill profile
Present rates Vs. 2009
PRIMARY
(Over 600 volts/ under 69 kV)
Distribution Increased Generation Unchanged MISO
Unchanged
Distribution Increased Penn Power 8.73/KWH MISO
Unchanged
7.62/KWH
Weighted average of seasonal rates when applicable
101
Electric bill profile
Present rates Vs. 2009
PRIMARY
(Over 600 volts/ under 69 kV)
Distribution Increased Generation Unchanged MISO
Unchanged
Distribution Increased Penn Power 8.73/KWH MISO
Unchanged
7.62/KWH
New proposed rider would forgive 0.5 per KWH for
these special rates in 2009 to soften impact.
102
Part V
Ready Fire Aim?
If you want to actively take part in the politics
of future Ohio energy costs, a little additional
background information and reading is highly
recommended.
103
ReadyFireAim?
2006 Generation Production Prices
104
ReadyFireAim?
2006 Generation Prices (plus Overhead)
Nuclear
1.97/KWH 1.5 3
2.37/KWH 1.5 4
Coal
Natural Gas
6.75/KWH 1.5 10
What would be the average cost of electricity
under State PUCO calculations where FirstEnergy
merges its generation versus FERC calculations
for individual FirstEnergy generation sites for
the following fuel resource breakdown
Assume for this example 50 overhead multiplier
105
ReadyFireAim?
2007 FE Generation Production Mix
From FirstEnergys website we learn that 19 of 20
power plants produce 12,733 megawatts of
electricity from either coal (58), nuclear (30)
or natural gas (12).
58
30
12
106
ReadyFireAim?
PUCO uses Cost plus fixed Profit (weighted
average)
Natural Gas
10 12 parts 120
Coal
4 58 parts 232
3 30 parts 90
Nuclear
Weighted Average
100 Parts
442
Under PUCO calculations FirstEnergys costs are
approximately 4.4 per KWH. Cost plus a fixed
profit brings generation pricing up to
approximately 5.1 per KWH.
107
ReadyFireAim?
Through FERC/MISO calculations under market
choice, these 19 FE power plants prices might be
as follows
Natural Gas
10 12 parts 120
Coal
10 58 parts 580
10 30 parts 300
Nuclear
Weighted Average
100 Parts
1,000
FERC believes that by using the highest marginal
cost for all generation unit mix more
generation construction will be encouraged.
108
ReadyFireAim?
New York Times Article September 4, 2007 A New
Push to Regulate Power Costs By DAVID CAY
JOHNSTON
has calculated that, in the year ending May 31,
customers in competitive states paid an
extra 48 billion for their power, compared with
what they would have paid under rates in
regulated states.
109
ReadyFireAim?
Brakey Consulting, on behalf of MICA, recently
collected data on electric rates in major cities
of every state. In order to estimate what will
happen to Ohios electric rates on January 1,
2009, we took a close look at the experiences of
13 other deregulated states.
We concluded that the market-based approach has
repeatedly produced unfavorable price outcomes
relative to prices under regulation. We have
found no data to support that even a single state
has benefited from the effort to enable
competition in the electric generation market.
(For more information on this study, see the
series of three reports, Lessons for Ohio from
Other Deregulated States, one each on
residential, commercial and industrial rates at
www.brakeyconsulting.com/reports.html.)
110
ReadyFireAim?
The MICA companies share a membership in the
Industrial Energy Users Ohio (IEU). MICA asks
that each of you visit IEUs recommendations on
how Ohio should address its electricity
challenges in 2007.
IEU has put forth a balanced set of solutions
that we believe will assist you in identifying
the best path forward for Ohio. IEUs
recommendations are available via the Internet at

http//www.ieu-ohio.org/informat
ion/education/
111
How can you repeat our success at your company?
It all begins by knowing how your electric rates
work now and in the future.
REMEMBER If you discover you have been going
around in circles you have probably been cutting
too many corners.
112
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