1Copyright 2014© Reprinted by permission of Pallet Enterprise magazine — All rights reserved, Industrial Reporting, Inc.

How would you like to reduce thecost to produce a wooden pallet?I’m hearing a loud YES from

pallet plants around the country. I’msure your first question is “What is itgoing to cost me to reduce the cost ofpallet production?” Your next questionis most likely, “How long will it take toget my investment back?” My answersare: (1) little to no cost and (2) almostinstantaneous return on investment. Do Ihave your attention?

Top Ten Low-Cost/No-Cost Methodsfor Reducing Energy CostsBy Ralph Russell

My suggestions involve a subject thatI have studied since I studied at the Uni-versity of Kentucky in 1965 –ENERGY. When you think about reduc-ing energy costs, these things come tomind: more efficient equipment, auto-mation, equipment removal andmaintenance. Did you know that thereare many methods to reduce energycosts without reducing energy consump-tion? This article is going to provideseveral suggestions to help you discover

low-cost/no-cost methods to reduce en-ergy costs at your pallet plant or lumbermill.

Rate SchedulesThere are usually electricity rate

schedule options for commercial and in-dustrial customers. While rate schedulesare designed to send certain financialsignals to influence customer energy us-age patterns, there are times whensimply changing to a different rate

PALLET ENTERPRISEAs seen in March 2014

EnergyCostsReprint_peMarch2014.pmd 3/14/2014, 4:05 PM1

2 Copyright 2014© Reprinted by permission of Pallet Enterprise magazine — All rights reserved, Industrial Reporting, Inc.

schedule may result in an energy costreduction.

Look for alternative electric rateschedules available from the local util-ity. It is usually the customer’sresponsibility to explore rate optionsand to request a change. Recently Iworked with a customer to explore rateschedule changes for three of his electricaccounts. An energy cost savings of

17.4% was identified just by changingrate schedules.

TaxesFederal and state tax deductions and

incentives are available for manyprojects. The U.S. Department of En-ergy DSIRETM (Database of StateIncentives for Renewables & Effi-ciency) www.dsireusa.org is a greatstarting point when looking for financialincentives. One of my favorite tax de-ductions was IRS-179D Deduction forEnergy Efficient Commercial Buildings.This deduction expired December 31,2013, but you may still be able to takeadvantage of this deduction for workperformed on a commercial building’sinterior lighting systems, heating, cool-ing, ventilation, and hot water systems,or building envelope between 2005 andthe end of 2013. The taxpayer claimingthe tax deduction must obtain certifica-tion of the requirements from a qualifiedindividual.

Also, many municipalities and statescharge a sales tax on energy purchases.Sales tax exemptions are not available inall areas, but they are available over awide area. As an example, if your palletmill has a monthly electricity bill of$15,000 and a 6% sales tax is beingadded on to the bill, you are paying anextra $10,800 annually in sales tax.What if you could obtain an exemptionfrom paying this sales tax? In somestates, you might also be due a sales taxrefund that could range from 12 to 48months. If your mill is in a state wherethere was a 48 month statute of limita-tion for the sales tax refund, you mightbe able to recover $43,200 in this ex-ample.

Utility RebatesStart your investigation into utility re-

bates at www.dsireusa.org. Afterlocating an attractive rebate, check theutility’s website to confirm that it is stillavailable. Many electricity utilities, suchas Dominion Virginia Power (DVP),have Energy Conservation Programsthat may benefit the customer. Three ofthe current DVP programs that may ben-efit commercial and industrial accountsinclude:

• Energy Audit - Financial incentivesare available that help cover a portion ofthe cost of the audit, up to the full price

of the audit, after completing some ofthe recommended improvements.

• Duct Testing & Sealing – Custom-ers can receive rebates by having ductand air distribution systems in their ex-isting buildings tested and sealed by aparticipating contractor using program-approved methods. This program has thepotential for significant energy cost sav-ings. It is estimated that the rebate wouldcover most of the cost to test and seal theHVAC ducts.

• Distributed Generation - The DVPCommercial Distributed GenerationProgram will pay participating custom-ers an incentive to reduce theirconsumption of electricity from DVPduring a limited number of hours eachyear when electrical demand is high.Supplemental power would be providedby backup generators located at thecustomer’s facility during these periods.If backup generation is currently in-stalled at the customer’s building or ifthe company is planning to installbackup generation, it might be eligibleto participate in Dominion’s Commer-cial Distributed Generation Program.This is a great opportunity for the cus-tomer if it has an existing generator.

Utility ContractThe first thing a company will want to

look at is its contract with the powercompany. This contract typically con-tains terms of agreement, description ofservices, effective date, rate schedule,contract minimum demand and descrip-tion of any extra charges. All of theseterms sound boring unless you are anattorney or purchasing agent. If you areplanning to build a new pallet or lumberfacility, all of these items should be un-derstood. Since you most likely havealready signed a contract with the elec-tric utility, let’s discuss the contractminimum demand and the description ofany extra charges.

A contract minimum demand (CMD)is typically set when the utility deter-mines the size of the transformer neededat your mill. This results in a minimumcharge even if there is no electrical us-age. If your electric needs have reduceddramatically and equipment has been re-moved, you might be able to negotiate alower minimum demand with the utility.This may result in a smaller transformerbeing installed by the utility. Why have

Top Ten Low-

Cost/No-Cost

Methods for

Reducing

Energy Costs

1. Rate Schedule Change

2. Taxes

3. Rebates

4. Utility Contract

5. Metering

6. Billing Errors

7. Demand Response

8. Operational Changes

9. Networking

10. Walk-Through EnergyAudit

EnergyCostsReprint_peMarch2014.pmd 3/14/2014, 4:05 PM2

3Copyright 2014© Reprinted by permission of Pallet Enterprise magazine — All rights reserved, Industrial Reporting, Inc.

a larger transformer than you need?It is important to be aware of actions

that trigger extra charges. A descriptionof extra charges, such as facilitiescharges, may be included in your con-tract with the utility. Why would a utilityinclude extra charges when they are al-ready charging you for the electricityconsumption?

Electric utilities typically include acharge known as a facilities chargewhen a customer asks for service that isin excess of what is normal. As an ex-ample, if you want an alternate electricfeed for reliability, underground serviceor a larger transformer than needed,there may be extra charges. How canyou reduce these extra charges?

The first step is to determine if theseexcess services are still needed. The util-ity may want to charge you for removalof the excess equipment, but it maybe worthwhile over the long term. An-other idea is to determine if yourelectrical load has grown and if the ex-cess transformer capacity is still excess.There might be a savings simply bycontacting the utility and requesting anadjustment due to the change in electri-cal consumption.

MeteringElectric utility revenue meters are

usually located on the customer side ofthe transformers. If the revenue meter islocated on the utility side of the trans-former, there may be a discount due totransformer losses. Another potentialadvantage to primary metering, if thecustomer has multiple meters at its loca-tion, is combining all of the meters intoone monthly invoice. The utility willmost likely want to charge a fee for rear-ranging the meter location.

Totalized metering is the combiningof multiple revenue meters into one vir-tual account. In the past, the meters werehardwired into a totalizing meter. Todaythe multiple meters can be combinedvirtually at the utility mainframe com-puter. The primary advantage to metertotalization is the reduction of the de-mand since most accounts don’t hit theirdaily peak demands at the same time.There may be a fee from the utility forthis meter totalization.

Sub-metering is customer-owned me-tering. This technique will not result indirect savings from the local utility, but

it will provide excellent intelligence tothe customer to let it know the energyconsumption of specific areas within itsbusiness. This is important if you wantto know the energy used, for example,by the nailer or other specific piece ofequipment or area of operation.

Billing ErrorsAre there billing errors on your

monthly billing statement from the util-ity? It is possible, but is it likely?Common causes for billing errors in-clude: metering errors, calculation errorsespecially if the bill was done by a hu-man versus a computer, use of outdatedrate schedules, and miscommunicationbetween internal groups and the billingdepartment. Utility bill tracking soft-ware packages, such as EnergyCAPExpress, are great ways to monitor yourenergy consumption and costs so thatyou can detect billing errors.

Demand ResponseDemand response, also known as load

response, is end-use customers reducingtheir use of electricity in response topower grid needs. Organizations, suchas PJM, a regional transmission organi-zation (RTO) that coordinates themovement of wholesale electricity in allor parts of 13 states and the District ofColumbia, pay end-use customers to re-duce their electric load during anemergency event by curtailing load orshifting load to a generator. End-usecustomers participate in demand re-sponse through PJM members calledcurtailment service providers (CSPs),who act as agents for the customers.Payment made to the end-use customersby the CSPs varies from year to year.

Operational ChangesThere are three primary operational

techniques that you can use to reduceenergy costs.

1. Shift load to off-peak periods whenelectricity costs are reduced. Off-peakperiods are usually nights and week-ends.

2. Turn off unused equipment. For ex-ample, put a timer on your aircompressor to make sure it is turned offat night. Turn off equipment duringlunch time.

3. Install more efficient equipment.The easiest area to target is lighting. In-stallation of more efficient lighting

results in immediate cost savings. Manyutilities offer rebates for more efficientlighting. LED lighting should also beconsidered. The price of a LED lamp ismore expensive but the life time cost isreduced due to its extended life and lesslabor needed for replacement. Installa-tion of more efficient motors and pumpscan also provide a quick payback.

NetworkingDo you attend national trade organi-

zation meetings or meet with other palletmill personnel in your area? Networkingwith your peers is a great way to learnhow others are identifying low-cost/no-cost methods of energy cost reduction.Your local electric utility and energyconsultants, such as eDiscoveri,www.eDiscoveri.com, are other excel-lent resources.

Walk-Through Energy AuditsWalk-through energy audits are quick

reviews to identify how, where andwhen energy is used. It involves touringthe facility and quickly identifying en-ergy savings opportunities. The basicenergy management techniques used in-clude: reducing equipment runtime,using more efficient equipment andshifting load to off-peak periods.

Will These SuggestionsWork for You?

Has my article given you some low-cost/no-cost ideas to reduce energy costsat your pallet mill? I hope the answer isyes. The top three methods that requirelittle to no cost to reduce energy costsare rate schedule change, sales tax ex-emptions and electric utility rebates.

Using these three methods may resultin a significant energy cost savings foryour pallet mill. eDiscoveri is preparedto help you identify the low-cost/no-costmethods of energy cost savings. Pleaselet me know if we can help and if youhave any questions.

Editor’s Note: Ralph Russell ispresident of eDiscoveri, an energyconsulting service designed to help com-panies save money and improve plantefficiencies. Russell formerly workedas a key account manager for DominionVirginia Power. He can be reachedat (804) 291-7667 or emailrwrussell2@eDiscoveri.com or visitwww.eDiscoveri.com.

PEPE

EnergyCostsReprint_peMarch2014.pmd 3/14/2014, 4:05 PM3