There is a window of opportunity for large commercial property owners, in most states, to get energy cost concessions NOW, instead of waiting between four to six years for electric deregulation to be implemented. The benefits of such opportunities decrease, as we get closer to the actual implementation date for full retail competition.
Cost Savings Opportunity
We believe the opportunity for electricity cost saving is currently available because of the following:
- The electric utility industry is rapidly restructuring. Many issues still await resolution, among them: the ultimate structure of electricity generation and delivery; when key changes will take place; what roles all of the players in the process will take. Many Utilities are attempting to view the world from the customers' perspective and are learning to compare themselves to their potential competitors. This effort to gain a competitive edge is forcing utilities to become flexible, responsive and adaptable - essentially, to be market-driven instead of driven by regulatory bodies.
- Eight states have already enacted legislation and implemented plans to allow full retail competition by 2002. In four other states, legislation has been passed and plans for the phase-in to full retail competition are being developed. Bills have been introduced in the legislatures of 25 states.
- Investor Owned Utilities (IOU's), are in the process of restructuring in order to position themselves to be competitive in the deregulated environment, and, as such, they are extremely interested in maintaining market share.
- IOU's have shown some flexibility in negotiating lower current electricity rates in exchange for long term customer commitments.
Including the amortized cost of required equipment, we believe that annual electricity cost savings of between 2% and 10% are attainable. These cost savings can be attained in a variety of ways such as:
- Aggregation of existing power consumption and demand.
- Aggregation and demand diversity.
- Aggregation and demand control.
- Qualification on lower rate tariffs.
- Power Aggregation will also position your properties to taken full advantage of the advent of Retail Electricity Deregulation.
Since the objective of IOU's is to maintain and expand market share, they will typically want a 5 to 10 year commitment from a customer. Executing a 5 to 10 year contract may restrict properties from taking full advantage of retail deregulation at some time in the future.
The uncertainty of future events, however, is the downside risk in any long term contract.
The objective of our approach will be to negotiate a contract in which the cost savings realized in the first 4 to 5 years will offset any unrealized savings obtainable after retail deregulation occurs. Valquest proposes an agreement whereby we will represent you in negotiations with your local utility company to obtain electric cost reductions for all of the facilities under your control. Valquest's compensation will be derived as follows:
- Shared savings based on a 50% of the net electricity cost savings (including the amortized cost of any equipment) for a period of two years from the onset of implementation.
- Valquest has more than 12 years of experience developing, designing and implementing energy programs.
- We have extensive experience in multi-tenant, multi-use facilities.
- We possess the technology and capability to construct the energy use profile of the combined facilities, which is required to negotiate with the power company and clearly define the cost savings.