Accounting for Sustainability

Energy accounting will soon impact everyone - even those not directly involved in sustainability efforts.
by | September 2, 2009

When utilities were cheap and global warming was a fringe issue, no one cared much about tracking energy use. Today, energy accounting - getting an accurate measurement of your utility usage and cost on a building-by-building basis - is making its way up managers' agendas. Even if you are not directly involved in sustainability, energy accounting is likely to impact your agency. At a minimum, you will probably be expected to pay for your utilities and many agencies will be asked to make significant reductions in their energy use - or face budgetary penalties.

Today Gerry DeSeve partners with Robert Fryer who teaches sustainable architecture to provide practical suggestions on how to save money and conserve energy. Their step by step process provides a critical guide for responsible managers.

- Stephen Goldsmith

The current push for energy accounting is driven in part by Energy Efficiency and Conservation Block Grant funding from the Department of Energy. EECBG money can be used to pay for establishing and maintaining an energy accounting project, whether conducted internally or by an outside contractor. Having a contractor do the work - including setup, staffing, training, and systems implementation - can run between $3 and $12 per bill, depending on the bill's complexity and the need for manual data entry.

Sustainability and EECBG strategies typically include a target for lowering government energy use. In Maryland, Governor Martin O'Malley's EmPOWER Maryland initiative calls on the state government to reduce its energy consumption 15 percent by 2015. Currently, Maryland spends $220 million annually on utilities - a 15 percent reduction will mean $33 million a year in savings.

The Maryland Department of General Services has begun its energy accounting effort by implementing the EmPOWER Maryland Utility Database. This system will house information from the state government's 4,700 separate billing accounts and nearly 15,000 separate meters. The information will be available to 60 state agencies so that they will be able to "control the consumption of utilities and manage reduction."

Hatim Jabaji, director of the Maryland Office of Energy Performance and Conservation, is heading up the development of the database. "The Governor's energy reduction goal is aggressive," says Jabaji, "and it has enabled us to lead by example - to show that real reductions can be done."

Jabaji believes that the database will drive new behavior, especially since the data is being used in Governor O'Malley's StateStat meetings - his regular reviews of agency performance - and because the issue is important to the governor himself. At the same time, agencies are able to use the data to self-correct without top-down management. For example, one agency found that it was paying the electricity bill for a Marriott hotel - an error that was quickly rectified by the utility.

Philadelphia's Greenworks plan includes a target of lowering city government energy consumption 30 percent by the year 2015. Hitting this target will save the city an estimated $36.3 million and save 1.62 trillion British thermal units of energy per year - the equivalent of the total annual energy usage of 16,200 households.

Philadelphia was an early innovator in public sector energy accounting. For the past eight years, it has logged every one of the city's utility bills into a massive database. Bill Toffey, the city's energy manager and a member of the Mayor's Office of Sustainability, demonstrated the impact of this effort by pointing to a four-foot-high stack of neatly organized bills and then opening up a spreadsheet report containing the same information.

Philadelphia's energy accounting has given the Mayor's Office of Sustainability sophisticated tools for measuring where change will have a significant impact and how the mayor's sustainability goals can be achieved. These tools will be used to track the progress of the Greenworks sustainability plan, for asset management and for performance-based budgeting.

While speaking with Maryland's Hatim Jabaji and Philadelphia's Bill Toffey, we observed several themes that can be easily applied to your own energy accounting efforts:

Build a strong relationship with your utility providers. Toffey and Jabaji both stressed the importance of being able to work seamlessly with utilities as key elements in their success. Jabaji hired a contractor, BITH Energy, to build and maintain the EmPOWER database. BITH worked tirelessly to make the right contacts at each of the 102 utilities providing energy to the state. This effort has paid off: Issues and problems are resolved quickly, and typically with only one or two calls.

Expect to spend significant time just linking information. When beginning their energy accounting efforts, Philadelphia and Maryland ran into the same set of problems: agencies' account names were not consistent; meters, bills and/or buildings were not matched up; and bills were not correctly allocated to agencies. This is like setting up the books in accounting, you will have the best long-term success if linking information is done correctly from the beginning - otherwise it will probably come back to haunt you.

Get electronic data. Utilities will be reluctant to provide data electronically unless they have state-of-the-art systems. Using the strong relationships you build with your utilities, be persistent about getting as much electronic information as possible. Usually simply changing the billing process can do this: The utility sends you the data they use internally to create your bills. Once you have the electronic data, it can be easily loaded into a database or spreadsheet for performing more detailed accounting work.

Make your data available internally and externally. Toffey and Jabaji share their information internally with top executives and agency line managers. This transparency enables decision-making and improves performance management. Externally, they have delivered the data to potential vendors during procurement, especially for energy services contractors, who base their bids on potential energy savings.

Strike a balance between top-down and self-correcting management techniques. Once detailed energy accounting data is available internally, you must incent agencies to self-correct by, for example, enabling them to share in savings. But you will also need to carefully present executives with data and with options for bringing agencies in line with targets, their peers, and national benchmarks.

See what else you can do with your data. Energy accounting is interesting because it yields budget information as well as performance results. It is hard to imagine any other performance indicator that is so accessible and so easy to use across an entire government. At the same time, energy data can be used to benchmark nationally through programs like Energy Star. You can also extrapolate your government's impact on the environment by calculating and detailing your greenhouse gas output, thus converting your energy information into your carbon footprint.

Join the Discussion

After you comment, click Post. You can enter an anonymous Display Name or connect to a social profile.

More from Management Insights