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PBS Commissioner Winstead Addresses 2006 Energy Expo

As prepared for delivery

Remarks by
David Winstead
Commissioner
Public Buildings Service
Energy 2006
Chicago, IL
August 7, 2006


Thank you Rick [KLIMKOS] for the kind introduction and I would like to welcome you to Energy 2006.  I would also like to recognize our cosponsors—the Departments of Energy and Veterans Affairs for their contributions to what I am sure will be a very successful event.  And a special thank you to our private sector vendors who are participating in the exposition.  As a cosponsor this event, GSA supports the federal energy management community as it faces today’s challenges and looks forward to sharing our strategies for success with you.  

Serious energy challenges confront us today.  It can seem that each one competes for our attention as the most urgent crisis demanding an immediate response.  I am sure you are familiar with them but I would like to discuss a few of these challenges today.

First, our appetite for energy consumption is increasing as we increase the number of people in our buildings, as we work longer hours, and as we depend more and more on electronic office equipment to accomplish our missions. 

The once predictable energy industry is experiencing unprecedented price volatility with consumers being asked to take on greater and greater responsibility to manage price risk, reduce physical constraints in distribution and transmission systems, and to ensure their own power reliability and security requirements are met though their own investments.  All consumers are experiencing historically high commodity price points, which can significantly impact utility budgets if you happen to be in the market buying significant amounts of power at the wrong time. 

Capital for investment is more difficult to obtain:  in the private sector because of increasing cost of capital—in the federal government because of the budget pressures that all federal agencies are facing.  The power we use to accomplish our missions is currently less dependable and more subject to extensive outages due to a combination of extreme weather, both in terms of historic temperatures and violent storm systems, aging energy infrastructure and increasing demand by customers which is outstripping new energy capacity. 

As federal agencies we have a mandate to procure renewable energy which may have a price premium associated with it.  Unfortunately, we cannot pick and choose one or another of these problems to individually respond to.  They are all linked to together and therefore must be addressed through a comprehensive energy management program.  

An example of one recent incident that exposed the extent of our energy vulnerabilities was Hurricane Katrina.  It was the perfect storm in more ways than one.  It had a devastating impact on our Nation’s energy infrastructure, which, in turn, had ramifications beyond the immediate impact area.  In response to this event, on September 6th, 2005, President Bush issued a directive to the heads of executive departments and agencies directing them to take appropriate actions to conserve natural gas, electricity, gasoline, and diesel fuel at their facilities to the maximum extent possible and to be diligent in the pursuit of energy conservation.  While the energy sector was trying to recover, the President said “it was important that the Federal Government lead by example and further contribute to the relief effort by reducing its own fuel use during this difficult time.”

While GSA and other federal agencies responded enthusiastically to this directive with a number of steps including working with our tenant agencies to take simple steps to reduce energy consumption, reviewing our internal facilities operations and projects where we could make a quick impact, a reading of current events reveals that challenges to our energy sector remain.  Just as recently as a few weeks ago, large parts of California and New York were struggling to keep their electricity grids operational.  As a result, millions of customers were either without power, could not depend on the reliability of that power, were asked to reduce their usage and probably paying historically high prices for that power.  

As the largest single energy consumer of energy in the US, the federal community must maintain its commitment to sound energy management now more than ever before.  That is why the need for this conference is so important.  As the government’s landlord, GSA takes this responsibility seriously. 

So, what do we do? 
Surprisingly, the answer is fairly simple.  We avoid using energy if at all possible.  If we use energy, we use as little as possible and as efficiently as we can.  Finally, we pay no more than we have to for that energy by using smart strategies and employing innovative methods of procurement. 

How do you avoid using energy? 
You ensure you design the most efficient buildings using age-old principles that reduce heat load where you don’t want it or increase heat load where you do want.  In essence, you put the forces of nature to work for you and not against you.  In San Francisco, for example, GSA is constructing a remarkable new federal building that minimizes its energy consumption by taking advantage of favorable local conditions.  This building is designed to self ventilate its occupants through a rather simple movement of airflow not from air handling and cooling coils units but natural ventilation.  That is an example of avoiding energy use.   The design of this building takes advantage of, and is very sensitive, to the low humidity and moderate temperatures of the Bay area.  Simply put, its design is a good fit with its location.  At the opposite extreme, you don’t construct a building design that ignores the local environment.   For example, traditional building designs in the Southwest have few windows or openings on a South facing wall.  This building design principally reduces solar heat gain and therefore, reduces the size and complexity of your air-conditioning plant.  Again, you avoid the need to consume energy.

How do you use less energy? 
You closely examine how much energy your building systems and energy using equipment consume in performing their function.  You calculate the cost of that energy consumption and compare it to the cost of operating alternative types of systems and products.  If the savings-to-investment ratio is positive, you perform a system retrofit and/or procure and use efficient ENERGY STAR rated products for energy intensive appliances and office equipment.

An example of using less energy would be replacing existing office lights with more efficient fixtures that use less energy, but produce a better quality of light.  You need lighting in office buildings but you may have more opportunities than you realize to maximize light output with minimal energy usage.  Another way is using energy-efficient equipment, such as: flat screen monitors that use less energy.  GSA has avoided using energy where proven cost effective by investing $58 million in fiscal year 2005 and 2006. 

How do you use energy more wisely? 

The Energy Policy Act of 2005 requires federal agencies to develop an advanced metering plan and install in all appropriate buildings by the year 2012.  GSA has received funding for a significant portion of the investment, and we are using an analytical software program nationwide to collect, archive, analyze, and report energy consumption in real time for buildings.  We are aiming to use this system to control our buildings’ energy usage at critical times when it is most beneficial to the local grid and cost savings are maximized to corresponding effort to reduce.  We hope to use renewable onsite power generation devices to further reduce our energy use.  Case in point, GSA is replacing the existing roof of the National Archives and Records Administration’s storage facility in Waltham, Massachusetts, with an integrated photovoltaic roofing product.  This system, which is also known as a “cool roof,” reduces the heat effect and actually feeds power back to the local utility grid when produced in excess of the building’s need, of course, at a credit to GSA’s utility bill.
How can we get the best deal for energy?
Many utility companies and electricity system operators offer financial incentives to customers that can better manage their load profile.  GSA has included implicit demand response language in its aggregated power contracts competitively awarded in deregulated markets.  Our Energy Center provides a daily alert system to all customers notifying them of potentially lucrative opportunities to shed load.  If you are one of the 40 federal agencies or non-governmental organizations on these contracts you know what I am talking about already.  If you don’t know about these contracts, please seek out our Energy Group’s booth on the convention floor for more information.  GSA buildings and other federal agencies on these contracts are realizing cost avoidance savings, greater budget stability and comprehensive demand response planning.   In fact, many other customers are learning from our practices.  A recent news article described how Maryland’s Department of General Services recently saved more than seven million dollars on an electricity supply contract it awarded through an online auction.  A company in Massachusetts, World Energy Exchange, was taped by the state to run the electronic procurement.  This company runs reverse auctions in which multiple sellers submit bids to supply a commodity specified by the buyer.  In Maryland, the savings stem from the cost differential between the bids obtained through the online energy auction and the published utility rates in various Maryland service territories, according to World Energy.  The article went on to say that the company’s government business began about six years ago with the General Services Administration and continues today.  GSA uses this process not only for electricity but has conducted large-scale natural gas reverse auctions for our Natural Gas Acquisition Program.
Unfortunately, energy prices remain at historically high levels as a result of increased demand and other factors.  While utilities attempt to mitigate some of those increases through long-term contracting and hedging—deregulation and pass-through fuel cost adjustments have exposed utility consumers directly to energy markets.  Future GSA utility budget forecasts reflect these conditions.  Other than near-term weakness in natural gas prices, we do not see any factors at work in the market that would point towards lower prices in the future for any energy commodity and most factors would tend to increase prices over time. 
Let’s look a single utility sector—electricity as an example.  We are particularly vulnerable to price increases because 46 percent of our annual usage is in states that have deregulated their markets.  We have in place electric supply contracts for FY 2008 in major east coast cities—Washington, DC, Chicago and Boston.  For FY 2008, cities such as Baltimore, the Maryland suburbs outside of Washington, DC, San Francisco, New York, Dallas and Houston will be affected by new contracts pending future competition.  We also anticipate that electric prices will increase in regulated markets to reflect increases in fuel costs—coal, oil and natural gas—as well as infrastructure investments.  Our Energy Center anticipates potential increases in the range of 4-5 percent. 
   
Based on specific and general price increases anticipated across the nation, we estimate that GSA will expend approximately $290 million for electricity for FY2008 on consumption of 2.90 billion kilowatt hours.  This would represent an increase in FY2008 over previous FY2007 budget projections of some $34 million we made just 6 months ago.   Just like filling up your car at the gas station, nothing grabs your attention more than paying more for something that you desperately need and were accustom to paying a lot less for.  I am happy to report GSA is currently showing a –3.5 percent reduction in energy consumption over the new 2003 baseline established in the Energy Policy Act of 2005.    Just imagine what our energy cost would be if we had not reduced consumption by that amount.

As I close, I hope that I have not painted too bleak of a picture today, but I think it is important to know what we as federal facility managers are facing as we procure and manage energy in our buildings.  GSA is proud of it mission of providing high-quality workplaces to federal customer agencies at best economies to the taxpayer.  And part of this mission is procuring utilities to those same federal agencies in the most cost-effective and environmentally responsible manner.  Our commitment is to offer strategic energy management programs that will result in increased net operating income and enhanced asset value of real properties.  This includes utilizing a comprehensive energy management program, improving our energy management capabilities, the energy performance of our buildings but also assisting our customers find the right solutions to their energy issues, either by using our GSA schedules and or taking advantage of the energy expertise we maintain in-house.   While we feel confident in our current strategies, we are constantly exploring new methods of facility management in other core mission  programs such as the WorkPlace 20-20/Program of Requirements or POR+ programs, working with customers to develop their initial workplace requirements, and our flagship programs of  Design and Construction Excellence, as well as a commitment to sustainable design that will keep us on the cutting edge of building performance and getting you that best value.  

I want to thank you for listening.  I hope all of you continue to share ideas and practices and make the best use of your time at Energy 2006.