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Primary Fuel Management


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Introduction


Until the 1960s, fuels used for heating, cooling, and electricity were readily available and relatively inexpensive. A local regulated utility company provided electricity, the same or a separate regulated utility company supplied natural gas, and regional fuel suppliers provided coal and fuel oil. The role of the facilities manager in fuels management consisted primarily of ensuring that contracts were in place with the various fuel suppliers for the provision of energy on demand. The energy suppliers were responsible for the procurement and transportation or transmission of energy and the storage of local fuel reserves and for ensuring that energy was available on demand.

The Arab oil embargo in the 1970s restricted the world supply of petroleum products and forced facilities managers to assume a greater role in managing the cost and availability of fuel to the institution. Natural gas supplies were curtailed, local fuel oil and coal suppliers were not able to deliver on demand, the production of electricity was placed at risk, and the cost of energy skyrocketed. This problem persisted long after the oil embargo was lifted and world market prices for oil had stabilized. This continuation of fuel shortages and inflated costs was caused by actions taken by large electrical utilities to secure fuel supplies by agreeing to long-term purchase agreements at inflated prices. The electrical utilities were less concerned with fuel prices than availability, as they were able to simply pass on the higher fuel costs to customers.

Most institutions reacted to the fuel crises by appointing a full-time energy manager whose primary responsibility was to control the cost, reduce the use, and ensure the continuous availability of energy. Under the stewardship of energy managers, many institutions reactivated long dormant coal-fired equipment, invested in central plant systems, and constructed large oil or coal storage facilities. In addition, most took advantage of projected energy savings and the Institutional Conservation Program sponsored by the U.S. Department of Energy to finance building energy management systems and energy conservation projects.

The Public Utilities Regulatory Policy Act (PURPA) and the Natural Gas Policy Act (NGPA), both of 1978, provided energy managers with more options for managing energy costs and availability. PURPA allowed electrical consumers to generate part or all of their electrical requirements and obligated the local electric utility to furnish standby capacity and to purchase any excess electricity produced. NGPA established the ground rules for the deregulation of the gas industry.

By the second half of the 1980s, deregulation of the natural gas industry had become a reality. Deregulation, combined with an abundant supply of natural gas and a drop in the cost of all fossil fuels, provided the energy manager access to low-cost gas supplies from producers and brokers, in addition to gas supplied by the traditional local gas utility.

The first half of the 1990s was marked by the passage of the landmark Energy Policy Act (EPAct) of 1992 and a reinvigoration of energy conservation initiatives as many institutions took advantage of rebate programs offered by local utilities. Lighting systems were converted to high-efficiency fixtures, motors were replaced with high-efficiency types, constant-volume motors were converted to variable-frequency drives, and building control systems were replaced with building automation and energy management systems. Regional heating and cooling plants were expanded, thermal energy storage systems were constructed, ground source heat pumps were installed, standby generation was implemented, and controls were placed on emergency generators to permit peak demand management.

One of the challenges for the energy manager is to thoroughly understand electricity deregulation. Experience indicates that unavoidable disruptions and confusion will occur with electricity deregulation, probably more so than with natural gas deregulation because of the inability to store electrical energy. Ensuring inexpensive and consistent power on demand, especially to critical facilities, will be an important and potentially time-consuming task for the energy manager.

The energy manager has and will continue to have many opportunities to reduce costs through the comprehensive management of fuels purchasing, use, and storage. Implicit in the opportunity to reduce costs is the risk of incurring significant financial penalties or having inadequate fuel supplies if this function is not carried out in an informed and carefully managed manner.

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