Inflation and spiraling costs have impacted us all. The price of gasoline, the cost of eggs, bacon and most other basic needs for food and transportation have exploded in the last few years. To combat these inflationary pressures, employees, unions and workers across all industries are expecting needed salary increases just to commute to work and put food on the table. Many municipalities are wondering, “What can we focus on to make some positive impacts and get a WIN?”
One of the major budget line items for most municipal governments (often just behind salaries and pensions) are their electricity and natural gas payments. Not a surprise to any CBO: utility increases in Arizona have shot up dramatically in the last few years. All the Investor-Owned Utilities (IOUs), such as Southwest Gas, Arizona Public Service (APS) and Tucson Electric Power Company, have seen commercial electricity rate increases skyrocket. From 2020 to 2021, Arizona’s average electricity price increased by 6%, making this the third largest increase in the western United States. The chart below further proves the upward trend of average electricity prices by comparing prices from 2005 to 2021.
Many experts believe that with the mandated transition to more renewable energy production, the significant upward trend in utility rate increases will continue well into the future. Even as current rates rise, IOUs are slated to continue the upward trajectory on costs. Imagine your total utility bill doubling in the next few years.
According to KAWC, Southwest Gas increased rates in 2023 by 7.6% for residential customers and 13.7% for small business customers. Additionally, the Phoenix Business Journal reports that APS expects an average residential customer monthly bill increase of 13.6%. APS President Ted Geisler told KTAR News 92.3 FM’s Arizona’s Morning News that a proposed monthly base rate increase of at least 23% is necessary but likely won’t make its way to customers.
It is easy to focus on electricity rate increases, but with current energy policies and global market dynamics, natural gas prices have risen at an even faster pace than electricity with residential consumers experiencing upwards of a 36% increase since 2020.
So, if you are a city manager or city council member, what can you do to blunt these massive utility cost increases? Doing nothing or hoping the problem will go away is not a strategy. Leading cities across Arizona, including the City of Yuma, City of Tucson, City of Sierra Vista and Town of Gilbert, showcase how cities and towns can proactively combat the impact of rising utility costs with investments in modernization, efficiency and sustainability.
The City of Yuma, for example, made strides toward its mission to enhance sustainability by modernizing City facilities with exterior and interior lighting upgrades, park lighting improvements, HVAC and pool boiler replacements, smart building controls and pool pump variable frequency drive and solar array installations. This project relieves approximately $6 million in general funds over the lifecycle of the new equipment, achieving $434,555 in just the first year.
Most municipalities have contemplated energy and sustainability initiatives for years, but the required upfront capital, staff resource constraints, stakeholder coordination and complex analysis makes it hard to get projects off the ground. Cities may take several approaches, but there is one approach that is proven to be the most effective for completing projects in less time, with fewer resources and with lower risk.
Compared to “piece-mealing” projects one at a time or waiting for equipment to break down, a design/build energy services approach allows a city to look at energy holistically and through the lens of the long term. Bundling all pieces of the puzzle together–rather than one or two at a time, as typically done in traditional construction methods–comprehensively addresses deferred maintenance needs, as well as resiliency and sustainability goals. What’s more, is the legislative availability of streamlined procurement options available, which make it easy to competitively procure a single-point of accountability without hiring multiple consulting firms, and incurring all the incremental costs and delays associated with a traditional 4-5 year+ construction/retrofit process.
If energy efficiency and sustainability (plus blunting budget-busting utility increases) are on your to-do list and you are looking for reasons to prioritize energy infrastructure projects in 2023, read on:
TOP REASONS TO ACT NOW
- PRICE & TIMELINE CERTAINTY
- According to CBRE, construction cost escalations have seen double digit increases for the last two years and are anticipated to escalate. If your city has constructed any facilities or has done any significant construction projects recently, you know firsthand the risks, delays, budget overruns, litigation, etc., that can result.
Not to mention the other delays created by supply chain disturbances, with many components often taking up to 12 months to arrive. The combined impact of inflation and delays are costing billions, forcing many cities to defer decision making or cancel projects altogether. By the time projects are ready to be pursued, it’s common for cities to see projects at double the cost than was originally budgeted in years prior.
Acting NOW, with a streamlined design/build approach, puts you in the driver’s seat and ensures you can lock down–and stand behind–the budgets and timelines you promise to stakeholders.
- According to CBRE, construction cost escalations have seen double digit increases for the last two years and are anticipated to escalate. If your city has constructed any facilities or has done any significant construction projects recently, you know firsthand the risks, delays, budget overruns, litigation, etc., that can result.
- GRANTS, INCENTIVES, REBATES
- More funding is available today from grants, incentives and rebates than ever before. Ranging from federal, state, local and private sector programs, municipalities have a chance to free up or stretch the impact of capital funds without taking on any debt. Finding a partner who has deep expertise in helping your city secure incremental funds is imperative. The money is out there.
- In addition to the billions in ARPA stimulus cities must obligate before December 2024, you can now also tap into an additional $370 billion from the Inflation Reduction Act (IRA) for clean energy generation, efficiency measures, improvements to water/wastewater facilities and EV charging infrastructure. IRA funds can help fund approximately one-third of the cost of solar for your city with direct payment tax incentives. Lighting, HVAC, battery storage and many other types of “electrification” also qualify for potential grants.
- EFFICIENCY - STILL YIELDS MUCH LOW-HANGING FRUIT
- It’s common for cities to think they’ve done all the low-hanging fruit there is to do if you have completed a few efficiency upgrades over the last decade. Even in relatively new facilities or buildings that meet LEED standards, run times and automation settings often get modified or overridden with time. Plus, technology improvements have changed drastically in just the last few years, particularly when it comes to ventilation standards or the electrification of natural gas-consuming equipment.
By optimizing your current infrastructure to peak efficiency and today’s standards, you can reduce your facilities’ utility consumption by 30%-40% or more.
- It’s common for cities to think they’ve done all the low-hanging fruit there is to do if you have completed a few efficiency upgrades over the last decade. Even in relatively new facilities or buildings that meet LEED standards, run times and automation settings often get modified or overridden with time. Plus, technology improvements have changed drastically in just the last few years, particularly when it comes to ventilation standards or the electrification of natural gas-consuming equipment.
- PIECEMEAL & BREAKDOWN APPROACHES DON’T WORK
- When it comes to energy, piecemeal approaches or waiting for things to break leads to unintended consequences with a variety of negative impacts, including staff resource strain, comfort and productivity issues, emergency repair cost, etc. Furthermore, the stacking order for pursuing building efficiency and renewable energy projects is critically important to avoid alternative energy system oversizing, another common pitfall of a piecemeal approach.
Having a single point of accountability for the energy analysis, design, implementation and overall savings assurance gets your projects off the ground without the risks of aforementioned budget overruns and delays. A comprehensive approach also allows you to reduce the load of your facilities first and then properly size solar energy and storage solutions to precisely meet the needs of your now more efficient facilities. The technology to achieve Zero-Net Energy and Carbon Neutrality is available today, however, these ambitious goals can only be achieved with a well-planned, comprehensive perspective.
- When it comes to energy, piecemeal approaches or waiting for things to break leads to unintended consequences with a variety of negative impacts, including staff resource strain, comfort and productivity issues, emergency repair cost, etc. Furthermore, the stacking order for pursuing building efficiency and renewable energy projects is critically important to avoid alternative energy system oversizing, another common pitfall of a piecemeal approach.
Find a city that has had success with a comprehensive energy program and ask them about their process. Ask for a sample RFP and adopt the document for your needs. Once you drive a competitive process, select a design/build partner and conduct a citywide assessment. You will then have the tools and data to align a scope of work and funding plan specifically targeting your stakeholder and city needs. Before proceeding with program implementation, you’ll be equipped with a whole picture perspective to make intelligent long-term decisions that best serve your city’s interest today, tomorrow and for the next twenty years. Act NOW, and you can capture a big WIN in the next year or two for your city, while striving to address the numerous other longer term challenges city leaders face today.
Author: Thomas Jackson is Corporate Vice President for Sales & Major Projects for Climatec Energy Services. He holds a degree in Energy Resource Management & currently serves on the Board of Advisors for Sustainability & Technology at Eastern Illinois University. Climatec is a wholly owned LLC as part of the Robert BOSCH family of companies.
