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New contracts lower cost of electricity at several UConn campuses

by Richard Veilleux - March 3, 2008

By using an innovative way to secure electricity, UConn is saving more than $3 million in energy costs.

The savings will be achieved through two new 20-month contracts that resulted from a purchasing mechanism known as a reverse auction.

The auction was conducted late last year in conjunction with the state’s Office of Policy and Management (OPM).

One of the contracts will provide electricity to the Depot and regional campuses and the School of Law for approximately $735,000 less than the University would have expected to pay during that period.

The UConn Health Center, which uses considerably more electricity than the regional campuses, will fare even better: it has secured a contract with through June 2009 that will save the facility nearly $2.5 million annually.

Additionally, the Health Center’s current seven-month contract, which was bid individually before the OPM-sponsored reverse auction, will have saved nearly $1 million when it expires in March.

Twelve percent of the Health Center’s energy will come from renewable sources.

“We’re very proud of our participation in the renewable energy program and our record of holding down energy costs,” says Daniel Penney, associate vice president of facilities management at the Health Center.

Penney says the Health Center used about 75 million kilowatt hours of electricity per year when it opened in the mid-1970s with 1.4 million square feet of space.

Today, the Health Center encompasses 2.1 million-square feet and in 2006-07, used about 79 million kilowatt hours.

“That speaks directly to what we’ve done, not only to offset costs, but what we’ve done to increase efficiency and decrease consumption,” Penney says.

Storrs-based officials already procure contracts for the delivery of natural gas, the fuel needed to run the co-generation plant for the main campus.

The plant is operating at approximately 85 percent capacity and is saving the University several million dollars annually, primarily by reusing heat generated by four turbines to provide electricity on the Storrs campus.

The electricity auction was conducted last September by World Energy, a firm hired by the state to run the auction for any interested executive, judicial, or higher education unit in Connecticut.

The auction was designed to evaluate potential energy cost savings by comparing the auction bids against World Energy’s projected current energy costs, and the future cost estimates provided by the University’s energy advisor, Energy New England.

The state also wanted to determine what contract lengths would be offered and how much renewable energy would be involved.

Ultimately, the pricing was favorable, and several choices were available in both contract length and the amount of renewable energy each offer provided.

UConn officials chose the longest term available – 20 months running through June 2009 – and the offer that included the largest amount of power derived from the use of wind, solar, and geothermal methods.

The new contracts require that 20 percent of the campuses’ energy needs be provided from renewable sources such as these.

Thomas Callahan, associate vice president for operations, says it is advantageous to lock in prices when future cost directions are volatile and uncertain.

Without a disciplined approach to securing expected future energy requirements, he says, “the University is exposed to significant unbudgeted energy expenses that negatively impact the resources available for other priorities.”

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