Pooling Your Options: Buying Energy in Bulk … with Other Buildings
July 17, 2012 — The savings can be significant. Last fall, Cooper Square Realty, which manages 600 properties, pooled 250 of them to buy electricity from an electricity service company. So, instead of buying 500 kwh of electricity for a single building, the company shopped for 130 million kwh. Individual properties saved between 9 and 20 percent on electricity costs.
"You get a better pricing structure because of the volume," says Cooper Square president Dan Wurtzel. His firm hopes to eventually bring all its managed properties into the new plan.
Buying in bulk also works for capital improvements. Five years ago, Fairfield Properties offered six of its properties the opportunity to convert to natural gas. By bundling the projects together, the company reduced the upgrade costs. The five properties that agreed to the offer are each saving about $100,000 a year on heating costs, says Alvin Wasserman, director of Fairfield.
Another Cherry Valley Sunday
For all that, convincing a board that the long-term savings is worth the capital investment is not always easy. Five years ago, Cherry Valley Apartments, a co-op in Garden City, Long Island, needed to replace its boilers. But rather than heed Fairfield's advice and convert to natural gas, the board spent nearly $100,000 on new boilers. Board members were concerned about possible gas leaks and since gas prices were comparable to oil at the time, the savings didn't seem to be worth the effort.
Flash-forward five years and gas prices are substantially lower than oil, a trend that is likely to continue. So when Fairfield sent the board members a letter last year suggesting they reconsider, they had a change of heart.
"We said, 'If we made a stupid mistake five years ago, let's not stick with a stupid mistake," says Joseph Evans, treasurer of the board. Cherry Valley accepted a $100,000 bid from the energy company Hess. The bid was 10 to 15 percent lower than all the other bids because Hess has a relationship with Fairfield. If Cherry Valley had been using natural gas last year, it would have saved $150,000, obliterating its upgrade costs in a single year.
There are ways to convince reluctant board members to consider changing course, say property managers. One option: Show them the numbers. Cooper Square sends each of its buildings a detailed description of its energy usage, highlighting how much the property would save if it joined the electricity pool.
If your board passes on an initial offer, follow up later, explaining how much comparable buildings have saved.
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