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CBIA IS FIGHTING TO MAKE CONNECTICUT A TOP STATE FOR BUSINESS, JOBS, AND ECONOMIC GROWTH. A BETTER BUSINESS CLIMATE MEANS A BRIGHTER FUTURE FOR EVERYONE.
One of CBIA’s members is a large designer and manufacturer of fuel cell technology and fuel cell systems. This manufacturer approached CBIA to strategically supply natural gas for a 14.9MW power generation facility in Connecticut.
The client had an existing power purchase agreement with a major utility for electricity. The contract pricing for the power generated was predicated on the utility default price. The client was interested in learning if they could get a better value and wanted CBIA to analyze their current contract pricing and structure.
CBIA, in conjunction with our partner Usource, developed a model to compare a forecast of predicted utility rates in Southern Connecticut versus the overall natural gas market. We then issued a competitive request for proposal (RFP) to our vast base of suppliers. As part of the RFP process, the CBIA team evaluated various product types, focusing on daily versus monthly swing, and the associated gas daily adders. In addition, CBIA analyzed and presented different supplier responses to the client while explaining the contractual nuances of each supplier.
Through the competitive RFP process, and by identifying the right time to go to market, CBIA delivered approximately $767,000 in savings over a 14-month period to the client. The consumption of 825,000 Dth per year should result in a 15% savings for the client compared to their previous contract with the utility. In addition to the savings generated through the RFP process, the client was able to regain a significant portion of their $600,000 letter of credit when they left the utility.
In 2022, one of the world’s largest bakery franchises, with over 700 locations in Australia, Canada, and New Zealand, opened its first United States location in Southwest Connecticut, with plans for expansion via franchising throughout the country.
Being new to the U.S., the company was not aware of the deregulated nature of some energy markets, including Connecticut. By providing an overview of the deregulated market structure, CBIA Energy Connections helped to educate the client on alternatives which considered the best and most cost effective option for each franchise. At the time, the standard offer rate from the utility was amongst the highest on record.
By monitoring the marketplace and soliciting bids from the majority of competitive suppliers and contrasting with the utility standard offer, CBIA Energy Connections was able to provide custom solutions for each franchise location which offered long term savings and a common end date for future aggregations.
In providing fixed price contracts for all the franchises, the client has been able to save in excess of $50,000 for all locations, enabling budget certainty in a volatile energy marketplace. In addition, the common end date will enable the member to participate in future CBIA Energy Connections group aggregations for additional savings.
Because CBIA is the premier business association in Connecticut, most of our members have their primary operations here. However, CBIA member companies that are headquartered elsewhere can also rely on CBIA Energy Connections as a trusted partner in energy to help manage procurement for their portfolio of operations, as we are licensed to operate in all the deregulated states.
An aerospace manufacturer who is headquartered out-of-state in a non-deregulated energy market, recently acquired four independent companies in Connecticut. Managing the nuances of energy procurement for these four new divisions, along with nearly a dozen other locations across North America, made for quite an arduous task for the company. Some of the Connecticut locations were finishing contracts at different times of year, and others were on the standard offer from the utility, which at that point was nearly $0.50/kWh. As such, the company needed help with a cohesive strategy to both save money and obtain budget certainty.
CBIA Energy Connections worked with the member to develop a strategy that incorporated bundling all four Connecticut locations under one contract. Said Ryan Shelby, CBIA Account Manager “Through this new contract, which contained staggered start dates per location per their legacy contracts, we were able to provide a new supply rate which was considerably lower than the utility standard offer. In addition, by aggregating all the usage across the locations, the company was able to get a far lower rate than if each location were entered into a supply contract on its own.”
In the first 12 months of this new multi-location contract alone, CBIA Energy Connections was able to save this member over $350,000.00 on electricity supply costs, at a time when utility rates were at their highest on record.
In addition to helping manage the supply rate, Energy Connections also identified that two of the four locations were paying sales tax on their electricity supply and delivery. By facilitating the submission of a tax-exemption form, the member was able to save an additional $20,000.00/year, as well as recover $8,000.00 in back taxes as an on-bill credit.
Lastly, in managing energy procurement across all Connecticut locations while providing industry expertise and periodic market updates used for budgetary planning, CBIA Energy Connections was able to free up significant time and effort for the member that would have been spent attempting to coordinate from 2,000 miles away, as headquarters had been doing up until then.
A franchisee of one of New England’s largest breakfast chains came to CBIA Energy Connections with plans for rapid expansion in Connecticut.
This CBIA member company was seeking to lock in a fixed price contract for long-term budget certainty in the midst of a rapidly escalating marketplace, but the company’s growth plans called for the acquisition of several new stores over a two-year period, nearly doubling their energy footprint. While many of the client’s existing electricity accounts bought electricity supply from local utilities, several of the new locations that the company was in process of acquiring were already under third-party agreements with multiple suppliers and various contract end dates.
Together with the member company’s chief financial officer, CBIA Energy Connections put together a schedule to be incorporated into a competitive supply request for proposal (RFP) containing multiple start dates for the 32 current and planned accounts. The RFP also called for additional flexibility via a provision to accommodate for unforeseen changes including the addition of new locations not yet identified, supporting the company’s longer-term growth vision.
This RFP was put out to six competitive suppliers and based on the results, the member selected the longest term available with a supplier who had both the lowest price and most flexible contract to accommodate the member’s expansion plans.
With this new flexible contract in place, the client was able to add ten new stores and eliminate two accounts which were closed, all while maintaining the same fixed contract supply rate and avoiding any early termination penalties. This was done at a time when both the competitive marketplace and local utilities saw an unprecedented rise in costs based upon the explosion of natural gas prices, a primary driver in electricity rates. As such, this customer was able to realize a savings of over $200,000 vs. the two-year average utility price.
The State of Connecticut exempts manufacturers from taxes on the sale of gas, electricity and heating fuel used directly in the fabrication or manufacturing of a product to be sold. This tax exemption can save manufacturers 6.35% on both their demand and supply purchases, yet it must be initiated with both the utility and supplier. When sales tax exemptions occurs, this line item is removed from the electricity or gas invoice and the company is credited.
In addition, manufacturers with SIC codes between 2000-3999 are eligible for a gross earnings tax credit of 8.5% for electricity, 5% for natural gas. This credit, which also must be requested, appears on utility bills as “manufacturer gross earnings tax credit.”
CBIA Energy Connections, the organization’s consultative electricity and natural gas procurement program, regularly performs audits of members’ invoices to ensure that all relevant tax exemptions are applied. According to Tom Guerra, Energy Connections’ VP of Operations, “Our consultants routinely discover situations where manufacturers are not receiving proper sales and/or gross earnings tax credits. In one instance, a very large manufacturer in Southern Connecticut was not receiving the gross receipts tax credit from their utility on their two largest electricity accounts.”
Based on this discovery, CBIA immediately contacted the utility, providing the necessary tax forms while requesting a retroactive refund on our member’s behalf to be paid for the maximum lookback period. This led to an investigation by the utility as to why the member was not receiving the credit.
Over the next two months, CBIA worked in conjunction with the utility’s senior management. Finally, it was determined that the member was in fact eligible for two years’ worth of gross earnings tax credits totaling over $136,000, which were ultimately paid over the next two billing cycles.
Guerra continues, “This happens more than one would realize. In another situation, we discovered that a mid-sized manufacturer who decided to take advantage of CBIA Energy Connections was paying sales tax to both the utility and their third-party supplier for their two electricity accounts. We questioned this and brought it to the attention of the member, who was unaware of the manufacturers’ sales tax exemption for energy. We then advised the member to complete the appropriate exemption form for each account, which were then submitted to both the utility and the supplier.” In this situation, the member received $65,000 in sales tax credits.