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Help Creating Your Annual Utilities Budget

Today’s blog features Q&A from our recent Energy Leader Webinar on “How to Create an Annual Utilities Budget.

We start off with general questions relating to budgeting approaches, variables and philosophy, and then move on to EnergyCAP application-specific questions. The final questions are in regard to the new Budgets Worksheet module in EnergyCAP, which produces an Excel spreadsheet enabling users to model and adjust their utilities budget for each commodity and building.

And now, here’s the Q&A:

What is a solid foundation for creating an accurate utilities budget?

Many managers begin the utilities budget process using the last year of utilities data as a starting point. Others seek to eliminate seasonal or one-time variables by averaging several years of data together. Another basis could be the usage average from prior years, but then applying today’s unit cost for each commodity.

It is important to determine the budget period, and to make the best possible evaluation of variables that might come into play during that period, including long-term weather projections (imprecise though they may be), weather anomalies in historical data used for generating the budget (www.weatherdatadepot.com is a great resource for spotting these), anticipated utility rate changes, occupancy changes, energy management initiatives, retrofit projects, and other building changes that could impact the square footage of conditioned space for your property portfolio.

Can our utilities budget be an energy management tool?

This is an important question that raises an even more fundamental question for your organization—how SHOULD your utilities budget be used? Some organizations pay all utilities out of a common physical plant or general services budget. Others distribute the budget department by department or agency by agency, so that the smaller business unit essentially “owns” a portion of those utility payments. This is more complicated, but the rationale is that if each department must pay utilities from its own “purse,” then there will be a greater incentive to save—especially if funds freed up from the utilities portion of the budget become departmental discretionary funds.

There are some significant issues with a departmental approach, including fairness. If shared facilities serve different departments, how will the utility costs be distributed? Is a comprehensive submetering system in place? If not, will a square footage allocation be sufficient, or are there other factors to be considered? Another difficulty is maintenance of the allocation rules or formulas, especially if the organization is changing rapidly over the course of the budget period. A final issue here is one of data transparency. If departments are responsible for their energy, then departmental representatives will want to have easy access to reliable energy data in order to track and verify use and cost. Energy management software can play a very valuable role in this area.

Whether your organization has centralized or departmental budgeting, it may be well worth your time to consider how the utilities budget could play a more significant role in achieving the goals of your energy management program.

Do you recommend making weather adjustments to water usage when budgeting?

We hear that question a lot, and the answer is that you cannot reliably use degree day data to adjust the water consumption. It might appear that your water consumption should be correlated with cooling degree days, and you could say that makes sense because if we have hotter weather than normal we might be using more water than normal. However, there is not a strong correlation between the two variables. For instance, the amount of water that’s used for irrigation is more highly correlated with soil moisture than it is with degree days and there are many factors that go into soil moisture.

Another aspect of this question has to do with behaviors that may be mandated by the government where in a drought condition people may be required to cut back on water usage. Such activities, when conducted on a large organizational scale could significantly affect the correlation. For these reasons, and others, EnergyCAP does not recommend trying to correlate water consumption with degree day data.

Can EnergyCAP track my actual usage and cost versus my utility budget as the year progresses?

The new budget worksheet does not do that. The budget worksheet in EnergyCAP Online simply builds an Excel worksheet using existing EnergyCAP utilities data. The final budget that you manipulate in Excel does not flow back into EnergyCAP, and the budget spreadsheet data is not used in any EnergyCAP reports. It’s strictly an external budget once it has been generated.

However, our EnergyCAP Enterprise product (the installed version of EnergyCAP) has a more granular, meter by meter budget module, and that module does save the budget meter by meter, month by month, including both usage and cost. Using the budget module in Enterprise, you can even create multiple budgets (worst case, best case, etc.). And there are nearly a dozen built-in budget reports that show comparisons between the actual utility bills and this very detailed budget that you created before the beginning of the fiscal year. So that module does track budget versus actual as you go through the year.

While this advanced functionality is suitable for some people in larger, more sophisticated organizations, the majority of our users are not looking for something that detailed. But either choice is available for someone who has the full EnergyCAP Enterprise system.

Can your budget worksheet add levels above the building level, for example, by zone or division, in a separate column in addition to the building level?

The budget worksheet cannot create that aggregated summary data in a separate column. However, using available filters when you create the worksheet, you could create a budget worksheet just for one division or one group of buildings, which would give you what you are looking for. You can filter in various ways depending on how you have configured your organization in EnergyCAP. If your organization has divisions or departments and you wanted to create separate budgets for each, you could simply set the filter that way when you generate the budgets. That would be one way to create the departmental budgets using the budget worksheet tool.

And you probably would want to do that anyway if the units were separated geographically, since the assumptions you make for one department (weather and unit cost changes, etc.), might be very different than they would be for another department that had different utility vendors and was located in a different climate. The budget worksheet provides that capability; it just doesn’t merge the data on one worksheet. You would probably want to maintain the different budgets on separate sheets, however you set the filters when you initially generate the spreadsheet.

If you’d like to see more of the budgets webinar, you can watch the complete recording online: