Mr. Kiesner

Eco-Friendly Practices

Natural Gas Prices Turn Up Heat on Energy Conservation

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

For hotel executives, knowing how a hotel uses energy is the first step toward knowing where to start conserving. Water heating alone, for example, accounts for almost 40 percent of a hotel's total energy cost, and two thirds of its natural gas use.

Perhaps surprisingly, the local electric company can help improve a hotel's energy efficiency. Power companies offer energy-saving advice, and many times programs and services, to improve a hotel's overall energy efficiency. These improvements will lead to greater control over a hotel's electricity-and its natural gas-use. They will also help to make the nation's electricity system more reliable and affordable as well.

Natural Gas Supplies Pushed to Limit

In 2003, natural gas prices averaged 60 to 65 percent above those in 2002. Forecasts for 2004 and beyond show that high prices will be sticking around. There is mounting evidence that, after 20-30 years of intensive development, output from some of the largest gas fields in the United States and Canada has reached a plateau. More than twice as many new wells were drilled between mid-2000 and mid-2001 than just two years prior, with almost every available rig in North America actively deployed in the field. Even with this massive increase in development activities, natural gas production never rose by more than 1.4 billion cubic feet per day-an increase of about 2.7 percent. Environmental restrictions and moratoria on gas drilling activity, which are increasing rather than decreasing, will further limit U.S. production levels in the near term.

Given this demand-supply imbalance, higher prices have been the inevitable result. A cold December has pushed natural gas spot prices to $6.711 per MMBtu for January 2004. For the past 15 years, gas prices have mostly stayed below $2.50 per million British thermal units (MMBtu). Some experts predict that natural gas prices will average $5.70 per MMBtu (in constant 2002 dollars) for the next two years and then generally decline to a level around $4.50 per MMBtu for the next 18 years.

Short Term Recommendation: Improve Energy Efficiency

In the short term, the country has few options to increase its supplies of natural gas. One thing it can do is to increase the efficiency with which it uses gas. The federal government can and should encourage this. For example, through the U.S. Environmental Protection Agency's Energy Star program, the government can promote the purchase of high-efficiency gas furnaces and boilers for those businesses with old systems that need to be replaced. The government can also "lead by example" by making sure that gas-fired equipment at its own facilities are well-maintained, that new equipment purchased exceeds Energy Star standards, and that all thermostats and setback controls function properly.

Long Term Recommendation: Increase Supply

While there may be limited opportunities for improving the natural gas situation, there are longer-term solutions for assuring that the country has adequate natural gas supplies. These include:

• Prompt passage of enabling legislation to allow certification of pipeline capacity for Arctic natural gas. This will allow market signals to determine when and how Arctic gas will make it to markets in the lower-48.
• Increase domestic production of natural gas where there are proven gas reserves, including, where appropriate, onshore and offshore federal lands that are currently off limits. Congress must find a balance between assuring the American economy and the American people that it has low-cost, competitive energy prices, and that the environment is protected.
• Rapid approval by the U.S. Department of Energy of liquefied natural gas (LNG) import applications, coupled with streamlined certification of infrastructure projects (LNG terminals and requisite pipeline facilities).
• Development of deepwater resources throughout the Gulf of Mexico.

Energy Advice for Hotels

For the hotel executive, the best advice for dealing with the high natural gas prices is improving energy efficiency. As a word of precaution, some hotels have signed short-term contracts to lock in today's natural gas price for the winter. Bear in mind that the worst may not be over at the end of the winter. If this winter is colder than expected, today's high prices could be even higher next spring when those energy contracts expire. In the spring, local gas companies will begin re-supplying their natural gas reserves for the next winter. This will create competition with industrial users and power generators, and as a result, higher prices.

There are a number of quick and easy steps hotels can take today to start taking control over their energy bills:

• Get the housekeeping staff on board. Little things they can do in each room-resetting thermostats, closing drapes, and turning off lights-will add up to make a big difference in energy costs.
• Reduce public and office area air conditioning use during unoccupied hours; raise cooling settings during occupied hours.
• Turn off unneeded lights in offices and public areas.
• When replacing bulbs, use lower wattage or ones that are more efficient.
• Periodically service and adjust heating, ventilating, air conditioning, icemakers, and refrigeration equipment.

Electric Companies are a Resource

For cost-effective advice and assistance in becoming more energy efficient, hotel managers are encouraged to contact their electric company. Electric companies typically offer free advice on using energy wisely, and many offer no- or low-cost programs that can help hotels take control over their energy use. Some sample electric utility energy management programs include:

• Energy-efficiency incentives-these are offered to encourage electric utility customers to purchase or replace their energy-using equipment with more energy-efficient models. Incentives are often offered on lighting, air conditioning, refrigeration, agricultural equipment, water heating systems, and motors.
• Training courses-these supply the latest information on energy-saving technology and design applications.
• Demand-management programs-these pay large commercial and industrial customers to cut back on their power use during peak periods or to shift what power use they can to non-peak periods.

Chain Assistance

The power industry set up the National Accounts Network to help hotel companies with properties throughout a region or the country get the energy advice they need. The Network focuses exclusively on the needs of businesses such as hotel chains with multiple sites or outlets. For help in improving their facility's energy efficiency, hotel executives are encouraged to call their power company, or visit their Web site. For executives with regional or national properties, the electric power industry's National Accounts network can help expedite contact with the electric companies that serve their hotels.

At no cost, the National Accounts Network will put hotel executives in touch with a single contact at each of the electric companies that serve their properties. Giving a hotel company a sole point of contact for each power company will cut down on phone calls and the time involved in dealing with many utility reps at different field offices.

The Network can also help hotel chains to take advantage of any energy efficiency incentives that electric companies may be offering. The National Energy Customer Assistance Network (NECAN) directory is a convenient guide for finding the power companies that serve each state and their National Accounts representatives. More information on the Network is available at:
www.eei.org/industry_issues/retail_services_and_delivery/National_Accounts/index.htm.

The country's natural gas situation will continue to challenge hotels and businesses to reduce their energy costs. America's electric companies can help. Power companies encourage their customers to use energy wisely because it is good for both groups. It helps homeowners and businesses to get more value from their energy dollar. And it helps electric generating plants and transmission wires to operate more effectively. This can improve the affordability and reliability of the nation's electricity supplies, and it helps to protect the environment.

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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