The newest power play.

• Author: Barnes, Joanne
• Position: Energy auditing in a company - Includes related article

Have you seen your company's natural-gas bill lately? If the numbers make you blanch, find out how to audit your energy program and tap into some real savings.

A large food processing company decided to perform a natural-gas audit for five of its plants. These plants are located throughout the United States and consume a total of 4.3 billion cubic feet of natural gas per year, at an annual cost of $11 million. Before the audit began, the company's director of energy purchasing and several energy experts interviewed plant personnel to gain a clear understanding of each plant's process and natural-gas usage patterns and hammered out the corporate gas-purchasing objectives. Then they began looking at cost-cutting opportunities.

The audit revealed more than $2 million per year in potential natural-gas savings. It showed two of the plants should arrange their own gas supply and transportation instead of buying a bundled service from their host local distribution company, and another was unnecessarily incurring additional expenses, even though its process and location made alternatives possible.

The audit prompted the company to be introspective about its energy needs and sources, something few companies do. Energy costs related to natural gas and electricity command a large portion of an industrial company's budget. The typical large industrial consumes at least one billion cubic feet of natural gas per year, while a small industrial consumes approximately one-third this amount. But gas costs don't necessarily correlate with size. Companies that aggressively manage their gas costs can pay as little as $1.75 per thousand cubic feet (Mcf) at the burnertip (or final gas cost). By contrast, burnertip costs of more than $3.50 per Mcf aren't unusual for unsophisticated companies.

Until recently, companies didn't have much control over their energy costs, short of ceasing production. Natural-gas producers sold to pipelines, which sold to local distribution companies, which in turn sold to corporations. All these separate transactions added to the ultimate price companies paid for gas.

But in the last few years, the Federal Energy Regulatory Commission has revolutionized the natural-gas industry through a series of orders mandating the unbundling of pipeline sales, storage and transportation. Some call this deregulation, but that falsely implies all regulations have been lifted. The term "reregulation" more accurately portrays the new, less stringent controls that allow for more competition.

Today, reregulation of the interstate pipeline network means you can now buy gas directly from producers or marketers and transport it to the burnertip under your own authority. In fact, some corporate decision makers are realizing six-figure savings by doing this. The key to achieving such savings for your company is strategic thinking and careful planning to improve your gas-purchasing efficiency and avoid being left behind.

The first thing you need to do is conduct an audit of your company's natural-gas procurement program. The audit will tell you how your company is spending money on its energy needs in relation to its goals and objectives and show how you can spend or save your dollars more efficiently. Before performing the audit, set goals for your natural-gas consumption. These may include reducing overall energy spending, establishing ready and dependable long-term supplies of energy...