Purpose
The U.S. Army Engineering and Support Center, Commercial Utility Program (CUP), the Army’s utility and regulatory experts, helps the Army purchase reliable utility services at the best rates and helps garrisons resell their utilities to tenant activities.
Benefits
A proven cost saver, CUP provides substantial cost avoidance (minimizing cost increases) and costs savings (reducing utility expenses). CUP provides utility consultants, utility company information, installation data, technical support and expert witnesses to appear before utility commissions in support of rate intervention to oppose utility company rate increases. Cost savings opportunities are identified through utility service studies and utility contract review and assessments.
Customer Savings
CUP technical and expert witness support has enabled an excellent track record of utility bill savings for the Army through rate intervention.
- Joint Base Lewis McChord, Wash. – Achieved a lower rate increase with Tacoma Public Utilities from a proposed 8.9 percent rate increase to 7.4 percent which yields an average cost avoidance of $303,000 per year for the next five years beginning April 2013.
- Fort Huachuca, Ariz. – Tucson Electric Power requested an annual increase of $2,670,055. CUP achieved a settlement that granted an annual increase of only $429,325, yielding an annual cost avoidance of $2,240,730, effective July 2013.
- Fort Bragg, N.C. – Achieved a cost avoidance of $3 million in the first year and $2.6 million in following years in response to their electric utility provider’s application for a rate increase of 10 percent effective June 2013.
Unlike other initiatives, CUP doesn’t reduce energy usage, but reduces the overall cost for energy procurement. CUP in partnership with the Army Regulatory Law Office have helped the Army achieve cost avoidance in excess of $5 million per year since FY09.
Services provided
1. Utility Rate Intervention – CUP provides technical support, assistance and expert witnesses/utility consultants to the U.S. Army Regulatory Law Office which represents the Army at utility regulatory hearings (usually in opposition to rate increase petitions filed by regulated utility companies). One example is Forts Benning, Gordon and Stewart in Georgia. Historically, intervention in Georgia Power rate cases has resulted in significant rate reductions and cost avoidance. In the 2010 rate case, the Army’s rate intervention resulted in credits, savings and cost avoidance of $1.94 million annually for three years for a total of $5.8 million. The current Georgia Power Company rate filling could increase Army rates by up to $1.5 million annually for a total $4.5 million over the next three years. CUP can negotiate with unregulated utilities for the best rates available to the installation. The benefits are significant cost avoidance and savings that can be as great as $7 - $8 million annually Army wide. Benefits of rate intervention are cumulative. Results from any given year carry over to three-five years in the future.
2. Installation Utility Management Evaluations – CUP assists and trains installation personnel to review utility billings to ensure billings are accurate, use the appropriate rate, exclude taxes for which the Army is exempt and includes any credits, e.g., for power outages. CUP also assists and trains installation personnel to calculate fair and equitable rates for utility consumption by reimbursable tenants. These benefits include tangible savings, cost avoidance and increased funding from non-Army tenants.
3. Utility Service Studies – Utility service studies verify that an installation is receiving benefit of the lowest rate offered by a utility company and if not, recommend steps to be taken to obtain the lowest rate offered and to identify other potential utility cost savings. Formerly identified as rate studies, CUP has enhanced the studies to more comprehensively assess several other factors affecting installation utility bills. Additional factors to be assessed include the status and net effect of onsite generation, general state of installation utility infrastructure, peak demand management and tenant utility reimbursement and billing. Utility service studies generally don’t produce direct savings and cost avoidance, but instead identify issues to follow up with installations on that can produce savings and cost avoidance opportunities. A study completed in FY13 by CUP revealed that Ft. Campbell could save $350K annually by switching from TVA's seasonal rate to the time-of-use rate.
4. Negotiate Special Rate Contracts – The Installation Management Reform Task Force recently recommended that the Army convert its utility contracts that are now tariff based (existing rate schedule) to special rate contracts. CUP can negotiate a special rate design with the utility company whereby if the installation aggressively manages its energy demand to reduce the utility’s cost of supplying energy then in return can receive the special rate from the utility. CUP is supporting the Vicksburg District with the renegotiation of the electric supply contract at the Tensas Cocodrie pumping plant.
5. Optimum Energy Procurement Analysis – CUP offers this service to assist an installation with Net Zero Initiative decisions regarding on-site generation alternatives and energy purchase options. CUP considers the economics of existing and proposed on-site generation assets while maintaining favorable utility provider contract rates, terms and operating conditions.
6. Utility Contracts Review – CUP is available to assist garrisons with utility contracting matters ranging from using deregulation to renewable energy and as a representative of the Chief of Engineers, who is the Army Power Procurement Officer, CUP has the authority to approve utility contracts and Power Purchase Agreements whose annual costs exceed $500,000.