As utility costs rise, small-business owners must get creative to save money

Inflation has been a major headache for business owners the last two years, and one of the biggest components has been the cost of utilities. Because of production constraints, government regulations, supply chain issues, and the war in Ukraine, the cost of utilities — specifically electricity — has been volatile.

Most experts are predicting continued swings in the market, and few believe that these costs will decrease any time soon, which is why, if you’re running any type of business, it’s critical that you take steps to keep energy consumption under control.

Fortunately, there are plenty of things you can do.

You can install timed thermostats to cut or increase power when and where needed and close off areas of your office when they are not being used.

You can add solar panels, more efficient roofing materials, and insulation throughout your building to conserve heat.

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Make sure you’re vigilant on equipment maintenance, replace older motors, and turn down the temperature on your water heaters and in the office. Many of my clients have been upgrading their lighting to more energy-efficient fluorescent systems.

Also, significant tax incentives for green energy projects were introduced or expanded as part of the 2022 Inflation Reduction Act. There is also a $4,000 credit for purchasing used electric vehicles, a $7,500 tax credit for purchasing new electric vehicles, and an increase in the depreciation deduction for energy-efficient commercial buildings, all which can help businesses purchase and install more energy-efficient equipment that can reduce costs over time.

Ask your local energy company to come for an on-site audit. Peco, for example, will send specialists at no charge to make recommendations for better energy efficiency and also discuss the programs it offers, including one specifically designed for small businesses.

Peco’s Small Business Solutions Program includes an energy analysis with recommendations — and financial incentives — for installing more efficient HVAC, water heating, lighting, vending, refrigeration and kitchen equipment.

“Our small-business solutions program is directed at small-business customers that may typically lack the time or financial resources necessary to investigate and pursue energy-efficiency upgrades,” said Shannon Christie, a program manager at Peco. “By participating in this and other programs, our customers see a direct benefit through reduced energy use and bill savings.”

Programs like these are commonly offered by large energy providers. But many small-business owners don’t realize that they have a choice of where they buy their energy. To take advantage of these options, a growing number of my clients have been working with independent energy consultants (or brokers) to help them figure out — and then purchase — the most efficient and cost-effective solutions for powering their companies.

“In Pennsylvania, New Jersey, and Delaware, the energy markets are deregulated,” said Kristin DeBias, cofounder and president of Energetek, a Philadelphia-based energy consulting and brokerage firm. “That means any business can shop with many choices to choose.”

DeBias’ company, like other energy consultants and brokers, evaluates and then builds a detailed profile of her clients’ utilities usage and then bids out their needs to various energy suppliers. Depending on the responses, she can then negotiate the best deal and advise her clients on when and how to buy their energy based on current market conditions. Currently, DeBias is advising her clients to purchase very short-term contracts.

“Due to the changing and very volatile markets, we’re recommending committing to a 6- to 12-month contract with an energy provider and certainly no longer than 24 months,” she said. “We’re looking for providers that might have deals or might have bought energy in the past in bulk and can offer it to customers at a more favorable price. They’re out there and businesses can save.”

Cardone Industries, a Philadelphia company that provides parts to the automotive industry, takes advantage of Energetek’s services to constantly monitor its power usage, identify alternative power providers, and recommend changes to their infrastructure in order to control these rising costs.

“We used Energetek to help us find incentives for facility improvements, monitor our utility pricing, negotiate new utility rates and providers, and then assist with compliance and continuous improvement goals,” a company spokesman said. “They also helped us research building improvements and upgrades because just like there are tax incentives for homeowners to install energy-efficient systems, there are incentives for businesses, too.”

Depending on the size of your company, an energy consultant may also steer you toward a “demand-response” program, such as the one through Peco and partners such as Baltimore-based CPower, a demand-side energy management company. Under programs such as these, companies can sometimes get incentives to purchase and install their own generators and then get credits for going “off line” and switching to the generator during requested peak times to reduce an area’s energy consumption.

According to Glenn Bogarde, a senior vice president at CPower, the program provides “compounding value and a great opportunity for businesses to improve their bottom line and help the community by keeping the power system sustainable and stable during times of high use.” Not only that, but it can be a big financial help for businesses that participate.

“If your business qualifies, you can realize significant savings on your costs because the utility companies will give you great incentives to stay off the grid,” DeBias said.

Gene Marks is the founder and president of the Marks Group, a small-business consulting firm based in Bala Cynwyd.