Originally posted – June issue 2012
Richard Costello is president of Acela Energy Group, an energy consulting group specializing in energy procurement and load management, as well as energy conservation training, auditing and on-site wind and solar generation projects.
Mr. Costello, a registered professional engineer, previously served as power supply manager for the Massachusetts Bay Transportation Authority, as well as a senior engineer in the Load Management Department of Boston Edison. He conducts energy procurement and management seminars nationwide for the Association of Energy Engineers, and in 2006 was inducted into the Energy Managers Hall of Fame.
Describe the natural gas system that supplies today’s self-service laundries.
Gas prices experienced by coin laundry owners are made up of two major parts: (1) the gas commodity, which includes a bit of the transportation costs, and (2) gas deliveries, which comes from your local gas distribution company.
The number-one thing that affects the price of natural gas is the commodity cost, which is determined by NYMEX futures trading in New York City.
The distribution portion – or cost of delivery of gas to the coin laundry – is determined by the regulatory authority of each state, which works with your local gas distribution company; in general, this price is stable and doesn’t change very much.
What other contributors affect what laundry operators might pay for natural gas each month?
The major contributor is weather. If it’s a cold winter, that will affect pricing. Of course, weather also can affect the prices in the middle of the summer. For instance, hurricanes can shut down oil and gas production, thus affecting supplies.
The second major variable in the price of natural gas is storage – the amount of natural gas that we have in underground storage facilities and Liquified Natural Gas tanks in the United States.
The third factor is economic demand. Are there a lot of factories out there cranking at full capacity? If so, they’re sucking a lot of gas, which also affects the available supply.
The fourth variable is the price of oil. A lot of major manufacturers can switch back and forth between oil and gas. For instance, if the price of oil is very expensive, these big industrial customers are likely to switch back to gas, thus raising the demand for gas. Of course, then the gas companies will raise their prices.
Also, the number of rigs that are out there looking for gas and oil affects prices as well.
And an additional factor affecting the price of natural gas is the world situation. If a number of Mideast pipelines or oil facilities are sabotaged, oil and gas prices are going to jump up.
So, those are your main contributors to the pricing of natural gas.
What can self-service laundry owners do to control these costs?
If a self-service laundry is located in a state and local gas distribution company territory that allows for third-party purchases of natural gas, the laundry owner can go out to bid, to lock in or fix the commodity portion of his or her gas bill for a certain period of time. Clearly, this will make budgeting easier and more certain.
How can laundry owners secure a favorable fixed rate?
First of all, they should gather up all of their gas bills, perhaps on a spreadsheet to clearly show how many therms they’re currently using. Next, send a proposal to four or five gas marketers, providing them with your location, your usage information, and your bank and credit information. At this point, you may desire to obtain a good price for a one-, two- or three-year fixed natural gas price for transportation and commodity.
As I mentioned, store owners can select a third-party natural gas provider – or they can use a consultant, who will charge an hourly rate to assist them in purchasing both natural gas and, where allowed, electricity.
Obviously, purchasing natural gas or propane isn’t going to make sense for every laundry owner. Approximately how many laundromat locations are necessary to make it worthwhile?
In general, I would say that if you spend more than $35,000 a year on natural gas, you may want to consider it. Of course, each case – and each laundromat – is going to be different.
Above all, coin laundry owners must remember that locking in a natural gas price is similar to purchasing insurance – during certain months, you may not save any money; however, you will be limiting your exposure, and that’s why larger companies prefer to “fix” the cost of either a portion or all of their gas requirements.
What factors determine electrical prices?
There are two major parts to your electric bill – (1) the commodity/generation costs and (2) the transmission and distribution costs.
The commodity costs are determined by the cost of the fuel used by your local power plants, along with the type of fuel used. For example, coal is cheap, while oil is not. Also, it’s worth noting that 14 states allow consumers to purchase their generation service from power marketers
The transmission and distribution costs are determined by the various state regulatory authorities, and they do not change very often. Your local power company always delivers your electricity to your laundry.
Are electrical audits advisable for coin laundry owners?
I would definitely recommend an audit done by your gas or electric company, especially if it’s free. Sometimes these companies will offer rebates if you purchase energy-efficient items – or they may pay for most, if not all, of some specific cost-cutting measures.
Don’t think that the utilities don’t want you to save energy. In fact, in some states, the utility companies actually make more money saving it than providing it to consumers. It may sound crazy, but it’s true.
Also, if you’re planning on building a new coin laundry, talk to the utilities provider before you build the store. Have them look at the plans. Perhaps there are ways to revise your original plans to make the store more energy efficient – rooftop units, lighting controls, lighting fixtures, energy-efficient water heating systems and so on.
For example, it may cost an extra $35,000, but in some cases, the utility will pay that $35,000 – and it will pay for the engineering audit time to go look at it as well. After all, it’s far more effective for a utility to give you a rebate before you build a building than after the fact.
What are some opportunities for laundry owners to reduce their utility costs?
There are a number of cost-cutting initiatives that store owners can take. Some of the easier ones that provide the most bang for your buck are:
• Eliminating all incandescent lamps from your laundry facility; instead, use CFLs or possibly LEDs. But be sure to check out the cost effectiveness of LEDs first.
• Using a digital thermostat to control space heating and cooling.
• Turning off exhaust fans, if they’re not needed at night.
• Considering using heat recovery from your dryers to pre-heat your store and/or your water.
• Purchasing the most energy-efficient washers and dryers available – and focusing on lifecycle costs, rather than the initial cost.
• Getting rid of any plasma televisions in your store. LED TVs use less energy.
• Making certain that your HVAC system can take advantage of days when the temperature is nice, allowing you to leverage the outdoor air.
• Being sure that your water heater is cleaned and serviced on a regular basis.
In a way, laundry owners are at the mercy of the gas, electric and water meters attached to their businesses, which determine their monthly bills. What checks and balances are in place to assure that these gauges are accurate?
In most cases, the meters and bills are correct. However, if you feel something is wrong with your meter readings, you can ask the specific utility to test your meter.
If you still think the meter is providing the wrong readings, you always have the option to install your own meter. However, the utility will not recognize the information given by your personal meter. Therefore, if you do install one – and the readings are quite a bit different from the utility company’s meter readings – then you will need to file a claim with the Department of Public Utilities in your state, or possibly even take them to court.
Obviously, it’s crucial to your laundry business to make sure you are being charged at the proper rate. So, if you think your bill is wrong, ask the utility company to take a look at it. If the utility did indeed make a mistake, they will fix it.
What do the next 12 months look like for natural gas, propane and electricity?
Natural gas prices are at 10-year lows. If possible, I would consider locking in a price. Also, with low gas prices come lower electric prices in areas that use gas to generate electricity – so, again, look into locking in your power prices, if possible.
By contrast, propane comes primarily from gasoline, so propane prices are related to oil prices, not natural gas prices. Right now, it’s not recommended to sign a long-term contract to purchase propane, unless you believe that oil is going to continue to increase in price.
Looking to the future, what types of alternative technologies should self-service laundry owners possibly consider to help alleviate the monthly burden of their utility costs?
I would consider a solar thermal system – and possibly concentrated solar technology. However, be cautious of anyone trying to sell you a long-term power purchase agreement for solar energy. Be sure to work with a professional consultant regarding solar power, and go over all of the calculations before you purchase anything.
For laundry locations using propane, I would consider possibly using propane-powered heat pumps to heat the water.
Is wind energy a possibility for certain store owners?
Wind turbines have been getting a lot of publicity lately. However, for coin laundries, this technology will hardly ever offer an acceptable payback – at least until installation and product prices come down, and energy prices go up.
What’s the best advice you could give today’s laundry owners, knowing that approximately 25 percent of their gross sales go directly to pay for utilities?
The best advice I can offer is to make sure that you understand the gas and electric rates you are on – and how your specific laundry operation fits with those rates.
If offered, have a free energy audit conducted by your local utility. In addition, take advantage of any rebates from your local utilities for cost-effective energy conservation measures. Several large utilities – such as those in Massachusetts, New York and New Jersey – have special, often very attractive, rebates for small commercial customers.
Again, look into locking in your natural gas and/or electric generation costs now, while prices are at historic lows.
Lastly, and it may sound overly obvious, but be sure to shut off all of your equipment when not in use.
