BOMA Edmonton Industry Breakfast

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Web-Based Tools and ReportingTo Improve
Operations

• BOMA Edmonton Industry Breakfast
• September 9, 2005
• Chris Vilcsak
• President, Solution 105 Consulting Ltd.

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Solution 105

• Founded in 1999
• Full Spectrum Utility Management
• Electricity, Natural Gas, Water
• Procurement Services (750 million of purchases)
• Detailed Billing Audits (identified over 10
  million in errors)
• Budget Creation and Variance Reporting (prepare
  budgets for clients totaling more than 100
  million per year variances 1)
• Load Profiling
• Online Reporting and Tracking
• Submetering, Cost Allocation Statements
• Tailored Solutions

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Why Look at Utility Management Tools and Services?

• Due Diligence and Auditing Requirements
• Staff Retention Becoming Critical Priority
• Costs are Increasing Fast!
• Rates are More Complex Than Ever
• Monitoring and Reporting Should Focus on Accuracy
  and Efficiency
• Outsource to Experts
• Time is the Resource of Concern

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Due Diligence andDetailed Auditing

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Due Diligence and Auditing

• Driven by Sarbanes-Oxley Act from US
• SEC implemented in August 2002
• Effectively, CEOs and CFOs of all publicly
  traded companies in the US must represent that
  their financial filings are fair and correctly
  stated
• Tenants and shareholders want accuracy
• Boards of Directors and Executive Managers must
  ensure delivery
• Utility costs have bottom-line, Net Income impact

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Due Diligence and Auditing

• Errors are not usually in math on the bill, but
  instead within the numbers themselves
• Simply tracking usage and cost figures is not
  Auditing but should highlight gross errors
• Detailed Auditing requires
• use of source data
• ability to re-construct utility bill

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Monitoring and ReportingTools and Services

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Detailed Budget Creation

• Creation of initial models
• Effects of weather, tenancy, operational changes
  are taken into account
• Hourly usage budgets are created for
  interval-metered sites
• Retail charges are applied
• Regulated charges are applied
• Budgets are summarized and reported
• Reports available on-line

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Budget Variance Analysis Reports

• Sensitivities to weather, tenancy are known from
  modeling work
• Actual weather is applied to model
• Adjusted budget figures are determined
• Variances are reported and analyzed
• Load profile deviations are highlighted
• Recommendations are made
• HVAC, lighting sweeps, etc.

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Energy Efficiency Projects

• Models create independent baseline figures
• BOMAs Go Green initiative requires baselines
• Government programs (CBIP, ERA/P) do as well
• Comparison of actual to adjusted budget figures
  indicates energy savings arms-length reporting
• Applying detailed rates (and rate changes)
  provides cost savings and indicates where
  deviations are caused by rate changes

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Benchmarking

• BVARs can feed into utility tracking, enabling
  benchmarking reports
• Benchmark against different parameters
• Usage / square foot
• Usage / student
• Cost / usage
• Cost / square foot
• Cost / student
• Identify best in class or justify capital s

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Example Benchmarking
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Utility Bill Tracking ToolBillSmarts.com

• Web-based billing templates
• Can be entered by S105 or your staff
• First-level bill auditing capability
• Enables benchmarking and portfolio analysis
• Used with interval or consumption meters
• Full reporting capabilities

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Submetering

• Usage/cost allocation to business units or
  tenants in facilities (Tim Hortons)
• Submeters on certain equipment can be used to
  improve efficiency (e.g. chiller plant
  optimization)
• S105 can tie into any major submetering system
  (Carma, Quad, Intellimeter)
• Read-and-bill statements / invoices

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Real Time Feeds

• S105 able to take real-time feeds into system via
  hardware or software routines
• Allows for real-time indication of savings due to
  short-term operational changes
• Comparing readings from real-time and utility
  meters may indicate metering issues
• Demand limits can be set for alarming
• Price alarms also available

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Operational Examples

• Load Flexibility will maximize benefits
• On-site generation
• Chilled water storage
• HVAC / BAS (Building Automation System) upgrades

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Example On-site Generation
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Example Energy Reduction
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Example HVAC Balancing
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Future Changes

• Smart meters will flatten system profile
• Savings for peak reduction efforts will be lower
• Effect should be smoother long-term pricing
• Changes to power markets in Pacific NW
• Higher pricing in neighboring market (double?!?)
• Expect pressure on AB pricing as a result
• Continuation/growth of incentive programs
• Growth in customer participation
• Utility costs are increasing

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Utility Costs are Increasing

• Use futures market as indicator
• Recent Futures for Power and Gas
• Q4 05 Q1 06 2006
• Natural Gas (/GJ) 11.36 12.20 10.00
• Electricity (/MWh) 86.50 83.75
  72.50
• 6x16 112.50 109.00 94.25
• Note Electricity prices shown are for 7x24
  profiles. Cost of 86.50/MWh are the same as
  8.65 cents/kWh. Price source BP Canada Power
  Weekly

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Questions?

• www.solution105.com

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Procurement Issues

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Contract Terms Conditions - Risks

• Volume Risk
• Price Risk
• Ability to transfer / assign
• Other Risks
• Counterparty/Credit Risk
• Performance Risk
• Force Majeure (Unit Contingency) Risk
• Miscellaneous

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Volume Risk

• Want to buy correct volume
• Structure will affect coverage
• Load following 100
• Block/structured balanced coverage
• Understand how energy efficiency savings will be
  handled
• Portfolio approach lessens volume risk

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Price Risk

• Real-Time and Short-Term Price Changes
• AB, ON price changes can be huge (x200)
• Load flexibility is the key
• An issue only on exposed load
• Long-Term Price Changes
• What happens if market moves either way?

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Transfer/Assignment Issue

• Property segment buy/sell/trade activity
• Contract buy-out impact
• Limited if market does not move
• Positive value if energy market pricing rises
• Negative value if energy market pricing drops
• Assignee credit worthiness is an issue
• May be difficult to split out a site from a
  multi-site agreement

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Other Risks

• Counterparty/Credit Risk
• Enron
• Most of focus will be on customer risk
• Note that retailer licence prudential
  requirements may only cover a fraction of a
  percent of their total exposure
• Performance Risk
• Enron
• Billing
• Additional services offered (demand response,
  etc.)

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Other Risks

• Force Majeure or Unit Contingency Risk
• A fixed price may not really be fixed
• What happens if retailers purchased generation
  is not available due to unit outage?
• Miscellaneous Risks
• Take or Pay
• Account management services
• Billing
• Limiting options for energy efficiency
• Regulatory changes

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Credit Issues

• Payment history not as much an issue
• Term offered may be affected
• Release of financials a problem for
  privately-held companies
• Down payments or performance bonds
• Trigger to provide future collateral
• Parental guarantees may be requested

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Questions?

• www.solution105.com