Buying in bulk isn’t a new cost-saving tactic, but when it comes to energy costs, one senior living provider is proving the principle applies to procuring electricity for its communities.
Depending on the number of communities an organization operates, energy spends could run them millions of dollars each year to keep the power pumping at their properties. But buying energy in bulk and then auctioning it to service providers has helped one senior living organization simplify the procurement process and save a few hundred thousand dollars each year in the meantime.
For the past five years that has been the strategy of Presbyterian Senior Living (PSL), a not-for-profit organization headquartered in Dillsburg, Penn., that provides senior housing services to approximately 6,000 seniors in 29 locations in the Mid-Atlantic region of Pennsylvania, Maryland, Ohio and Delaware.
Last month, the company successfully procured more than 30 million kWh of electricity for three of its Pennsylvania communities. The kilowatt-hour (kWh) is commonly used as a billing unit for energy delivered to consumers by electric utilities.
“Like so many in senior care, we’re seeing more and more pressure to reduce costs,” PSL’s Chief Financial Officer Jeff Davis told SHN. “This strategy allows us to save money that we can better spend elsewhere in caring for people within our ministry as a nonprofit.”
Since 2009, energy procurement firms World Energy Solutions and EnergyWise Consulting have worked together to procure electricity for PSL behind six separate utility service territories in Pennsylvania and Maryland. Over the course of that time, PSL has turned to the energy management firms to help manage its portfolio of sites, accounting for more than $5 million in annual electricity spend.
Through a series of competitive auctions run on the cloud-based World Energy Exchange, PSL was able to test multiple terms and products behind the PPL, Penelec and West Penn Power service territories. Leveraging this process, the organization received more than 120 bids from 12 electricity suppliers, ultimately securing competitive rates for fixed-price contracts running through 2017. Delivery under the new terms begins in January 2015.
“The more you buy, the more buying power you have,” Davis said.
Prior to Davis’ arrival at PSL, the organization was not yet procuring energy in bulk via the auction process. A few years ago, the company noticed electricity rates were going “through the roof” at one of its communities in Maryland, thus spurring the decision to purchase bulk electricity for that facility, Davis said.
Now, the company procures energy in bulk for all of its locations, opting to purchase in bulk as opposed to just procuring energy for one asset at a time, contributing to its overall savings of about $600,000 to $700,000 per year across its facilities.
“It’s like buying for anything else,” Davis said. “By buying electricity for a group of facilities, I can procure better pricing than if I was trying to procure one. It’s more efficient.”
Written by Jason Oliva