Mr. Kiesner

Eco-Friendly Practices

Keeping Electricity Affordable and Reliable

By Steve Kiesner, Director of National Accounts, Edison Electric Institute

With the cost of all energy supplies rising, the nation's electric power industry is committed to ensuring that electricity, one of our most versatile energy sources, remains affordable and reliable. We are investing in the nation's electricity system today. And we are advocating public policy positions to ensure that the supply of electricity can meet the country's ever-growing demand tomorrow.

These supply-side measures will take time, but they are essential to keeping electricity affordable and reliable. In the meantime, hotels, and indeed all electricity customers, can help by making sure that they are getting the most value they can from each dollar they spend on electricity.

The good news is that you have many resources waiting to help your company to improve its energy efficiency. The nation's new energy law, the Energy Policy Act of 2005, is one source. Another is the electric company or companies that serve your business. I encourage you to take advantage of both. There is always room for greater savings. And as you know, these savings can add up to greater profitability.

The Energy Policy Act of 2005 contains a variety of initiatives and incentives to boost the country's overall energy efficiency. One way is by setting higher energy-efficiency standards for new commercial products that use large amounts of energy.

Among the technologies targeted for higher efficiency standards are:

The energy law also offers $2.7 billion in tax deductions and credits to encourage homes and businesses to purchase high efficiency products and appliances. For example, commercial buildings that are built to exceed by 50 percent the energy efficiency rating of a "baseline" building in the American Society of Heating Refrigeration Air Conditioning Engineer's (ASHRAE) building code 90.1-2001 can qualify for a tax deduction of $1.80 per square foot.

If the whole building does not reduce energy use by 50 percent compared to that standard, it can still qualify for a tax deduction of $0.60 per square foot per "sub-system". The eligible sub-systems are interior lighting, heating, cooling, ventilation, and hot water systems, and the building envelope (essentially everything that separates the inside from the outside). These sub-systems must exceed the energy efficiency of a "baseline" sub-system in the ASHRAE 90.1-2001 building code.

To get the deduction, the U.S. Department of Energy (DOE) has to determine the energy and cost calculation requirements (based on the guidelines of the 2005 California Nonresidential Alternative Calculation Method Approval Manual). DOE has to approve of "qualified computer software" to use for these calculations. There is also a certification process that must be defined by DOE, which will include inspection and testing by qualified individuals.

One caveat to this is that ASHRAE has published new commercial building codes: 90.1-2004 Standards. The International Code Council also updated its Energy Conservation Code in 2003 (IECC 2003). At least 20 states have adopted ASHRAE 90.1-2004 or IECC 2003. And both are more stringent than 90.1-2001.

Businesses are encouraged to try to obtain tax deductions in states that have already adopted the 2003 or 2004 codes. The reason: In those states, the building are already more efficient. Businesses should also try to combine the federal tax incentives with any incentives being offered by the states, electric utilities, or both.

The window for these incentives is scheduled to close on December 31, 2007, although discussions are underway that will likely extend it. We are a member of the Commercial Building Tax Deduction Coalition, a broad-based coalition of business, trade, government, energy efficiency, and other groups and organizations that is working to ensure the Energy Bill tax incentive provisions are implemented smoothly. This Coalition also promotes awareness and information about its benefits, and energy efficiency improvements in commercial buildings. For the latest tax incentive information, visit our website at www.eei.org/na.

The Energy Policy Act of 2005 is also offering federal tax credits for on-site distributed generation systems-solar energy, microturbines, and fuel cells-that meet certain efficiency requirements. As with the other tax credits, theses are available only this year and next year.

The tax credits for solar energy systems have increased from 10 percent to 30 percent for 2006 and 2007. There is no dollar or cost cap on the tax credit. The following solar systems qualify:

Microturbines are small combustion turbines that produce between 25 kilowatts (kW) and 500 kW of power. These are eligible for a 10 percent tax credit that is capped at $200/kW of generation capacity. To qualify, the microturbine must:

Fuel cells also qualify for tax credits. A fuel cell is similar to a battery in that it uses an electro-chemical reaction to create electric current. Fuel cells receive a 30 percent tax credit that is capped at $1,000/kW of generation capacity. To qualify, the fuel cell must:

As with the other tax credits, you should try to combine the federal credits with any applicable state or electric utility incentives.

Two good web sites that also show state programs are: http://www.eere.energy.gov/femp/program/utility/utilityman_energymanage.cfm and Consortium for Energy Efficiency www.cee1.org/com/bldgs/bldgs_ps2005.pdf. The states that have set aside the most money for incentives are: Northwest (WA, OR, ID, MT), Northeast (NY, NJ, and ME), Upper Midwest (MN, WI, IL, and IA), CA, and Florida.

Energy prices are making headlines today. To take them off the front page will not be easy. It will demand steps to both increase energy supplies and energy efficiency. If your company has not already joined in the effort, we encourage you to start today.

Steve Kiesner is Director of the Edison Electric Institute's National Accounts Program. Based in Washington, D.C., Edison Electric Institute (EEI) is the association of United States shareholder-owned electric companies, international affiliates and industry associates worldwide. Our U.S. members serve approximately 90 percent of the ultimate customers in the shareholder?owned segment of the industry, and nearly 70 percent of all electric utility ultimate customers in the nation. They generated almost 70 percent of the electricity generated by U.S. electric utilities. Mr. Kiesner can be contacted at skiesner@eei.org

Steve Kiesner is Director of the Edison Electric Institute’s National Accounts Program. Based in Washington, D.C., Edison Electric Institute (EEI) is the association of United States shareholder-owned electric companies, international affiliates and industry associates worldwide. Our U.S. members serve approximately 90 percent of the ultimate customers in the shareholder-owned segment of the industry, and nearly 70 percent of all electric utility ultimate customers in the nation. They generated almost 70 percent of the electricity generated by U.S. electric utilities. Mr. Kiesner can be contacted at 202-508-5000 or skiesner@eei.org Extended Bio...

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