It’s no secret that the industrial sector is one of the leading energy consumers across the globe. Factories, also known as manufacturing facilities, require a tremendous amount of energy to keep various machinery and equipment running at an optimal level.
Many factories think they have the right protocols or methods in place to reduce spending on energy, but working through a detailed energy audit is truly the only way they can uncover ways to cut costs.
In this article, we will explore average industrial electricity costs for factories, the two different kinds of energy audits (billing and consumption-based audits), and how factories can reduce costs through an energy audit.
According to the US Energy Information Administration (EIA), factories account for 32% of the overall energy consumption in the US.
By looking at factories of different sizes and located in different states, the EIA found that factories have an average monthly consumption of 80,543 (kWh) at an average price of 6.67 (cents/kWh). Based on these numbers, the average monthly electric bill for factories in the US is $5,370. This is simply an estimate and many factories pay much more for electricity depending on their size, location, and type of operation.
So, while the EIA is tracking actual factory usage for the data cited here, the law of averages does keep this average monthly cost quite low. We have seen some clients spending over seven and eight figures per year ($1,000,000-$10,000,000+) on their electric usage depending on the type of manufacturing facility.
There are two different types of energy audits that factories can conduct – energy billing audits and energy consumption audits. Since savings can be found without capital expenditure with an energy billing audit, we will focus most of our attention on the details and benefits of this type of audit.
An energy billing audit is conducted in order to uncover savings within your energy invoices and contracts.
At P3 Cost Analysts, we specialize in this type of audit and have our experts look for overcharges, errors, and other opportunities for savings that most customers aren’t aware of. With our industry knowledge, we are able to deeply analyze your energy tariffs and bills in order to find hidden areas of savings.
In an energy billing audit, we are not recommending any new technologies or methods to reduce consumption or anything that involves capital expenditure. We are strictly seeking financial savings within your invoices due to energy vendor errors.
Below, we explore the benefits of conducting an energy billing audit and how P3 Cost Analysts find savings due to overcharges or errors on your electric bills.
As experts in the energy industry, your team of auditors has access to nationwide pricing data which is typically inaccessible to the average customer. With this data in hand, they are able to compare your rates to similar types of factories in order to see if your contract rates are fair and acceptable.
If it is found that you’re paying more than you need to for your factory’s energy needs, your team of auditors can work on your behalf to negotiate the best rates possible with your energy supplier. This most commonly happens in deregulated markets where you actually have the ability to choose which energy supplier you work with.
By taking a thorough look at your past and present energy invoices, auditors commonly find a variety of different errors, overcharges, or extra fees that you unknowingly have paid for. Once the auditors have compiled their list of findings, they can open up a case with your energy supplier and work to bring you back the credits to which you are entitled.
Since factories use so much energy, it’s important for them to function under the proper tariffs in order to optimize their energy spending. Due to the complex nature of energy tariffs, it’s almost impossible for the average customer to understand how tariffs work and if they are, in fact, operating under the correct ones. Your team of auditors will know how to work through the appropriate tariff documents to see what tariffs you qualify for and will help you make the necessary changes.
Consumption-based energy audits focus on ways to help factories reduce their energy usage and implement energy-efficient technologies. Many companies offer this type of service and there’s a variety of different products and devices they may recommend to prevent energy waste.
Though this type of audit has its place and purpose, many of the solutions that get recommended require a great deal of investment from a given factory. For factories looking for cost savings on energy without capital expenditure, they will have to work through an energy billing audit with a team of experts.
During the engagement phase, we will walk through our shared savings agreement during a 20-minute meeting and also let you know what materials we will need to get started, including contracts, authorization documents, and invoices.
Onboarding consists of us accessing 12–36 months’ worth of your energy invoices. Every state has different statutes of limitations and we will go back as far as your state allows us to go.
During the audit, we will take a close look at your invoices and see if there are any billing errors, overcharges, or other unnecessary fees. As we find these discrepancies, we will update you weekly or bi-weekly and bring these savings to you along the way. Typically, it takes anywhere from 4–6 weeks to share our findings and then another 4–6 weeks to actually implement these savings.
Our service doesn’t end with this initial audit. We will monitor your invoices on a monthly basis moving forward to ensure that your savings are upheld and that no other overcharges come up.
We worked with a large manufacturing company that had utility expenses well over $5,000,000 per year. Since reducing these expenses is a complex process, they wanted to have third-party experts review their invoices and contracts to see where there might be savings.
During our risk-free expense audit, we were able to find multiple errors and overcharges on their electric expenses including misapplied taxes, stuck meters, and incorrect fees.
Through our audit, we were able to generate a $220,000 refund check. We also generated over $360,000 in additional savings over the course of our engagement.
Energy is a major expense for factories due to them powering a large amount of equipment, heating and cooling large spaces, and maintaining the proper lighting throughout their facilities.
For factories looking to uncover many savings within their invoices and contracts, an energy billing audit is required. During an energy billing audit, a team of experts will find overcharges, errors, and other opportunities for savings in this cost category. An energy billing audit will also tell you if your factory is functioning under the right tariffs which is an important aspect of cost savings.
Factories can also conduct a consumption-based energy audit to analyze their consumption practices and figure out what energy-efficient technologies they could possibly implement. Due to the fact that the solutions found within consumption-based energy audits are capital intensive, we recommend working through a billing audit to find savings without additional investment.
If you’re interested in conducting an energy billing audit for your factory, our team at P3 Cost Analysts is ready and able to help. To schedule your free expense audit, contact us today!