We interrupt our regularly scheduled discussion of energy efficiency because things got interesting this past week.

This is a weekly newsletter, and life in the NYMEX is measured in 15-minute increments, so we sometimes miss out on the pulse-pounding excitement that happens on the trading floor (indeed, much of the activity in 2008 was better described as pulse-stopping….). This past week was a case in point; in fact, the wrap up to this particular incident is playing out even as we write this.

If you’ve been following the NYMEX numbers and reading our commentary, a casual glance at yesterday’s close, listed below, is bound to provoke a response of “what the hey?….!” We’re up about 15% across the board from last week. This after months of constant drift downward.

Actually, that rise in price happened mostly during the space of a few hours last Thursday….while we were writing last week’s newsletter. After a short burst, prices pretty much stabilized for the week.

What happened?

Check last week’s weekly storage report, and you’ll see there was a withdrawal of 24 Bcf. Expectations in the industry had been for a withdrawal of around 30 Bcf. That 6 Bcf difference (don’t forget, we’re talking 6 Bcf out of 1,650 Bcf in storage, or about .36%) set off the price spike.

If you’re thinking “that’s nuts,” you’ve got a lot of company. Many experts were scratching their heads over it. There was some talk about natural gas prices “correcting” to match rises in oil prices, but that analysis felt a lot like grasping at straws.

However, add in what’s going on right now (see next paragraph), and we believe that there’s a clear lesson to be learned here.

Check out this week’s storage numbers, which were released at 10:30 EST this morning. Natural gas is back to being injected INTO storage. Care to guess how the NYMEX is reacting?

If you guessed that prices dropped right back under $4.00, then you’ve been paying attention. NYMEX may rally a bit before the day is done, but there was a precipitous drop (it looked a bit like the price fell off a cliff) immediately after the release of the report.

What this means to you. Have you ever watched the finals of the 100-meter dash at the Olympics? These elite athletes get over-excited and over-amped and “jump the gun” on the start.

You remember all those speculators who helped drive natural gas prices up into double figures last Summer? The ones who fled the market as prices dropped? They’re still out there. They’re still looking for quick and easy short-term profits. They consider themselves the elites of their field.

As the AIG situation showed us, the people who helped engineer our current financial troubles haven’t learned anything. They’re just waiting for the sign that it’s time to do exactly what they were doing before.

Last week, a bunch of these over-excited, over-amped investors jumped the gun. Just couldn’t risk being the second investor in when the market bottoms. They hung for a week, looked at this week’s report, and went “oops.”

Are you bottom watching? Are you looking for that “sure sign” that the market has hit bottom before you think about securing your next energy contract? If so, you’ve got a lot of company. And the company you’re keeping is much, much quicker than you are.

At Cost Containment Intl., we’re proud of how quickly we can expedite the bidding process, but compared to the 15-minute time span of the NYMEX, energy contracts move at a glacial pace. The bottom is not when you want to be making your move, because that price is going to be long gone before you’ve even seen your first offer. There are a lot of people out there ready and waiting to bid prices up again, and they’re getting pretty hair-trigger about it. You’ll still be sitting in the blocks while the other guys are halfway down the track.

Meanwhile, if you can get your head around a timeframe longer than 15 minutes….say, three years or more…it’s time to talk long-term energy strategy. Electric and natural gas providers are loosening up for contracts beyond 24 months. We’re not just talking your current contracts. We’re talking your next contract. Cost Containment Intl. is finding good opportunities beyond 2010, and you want to be in on them. Security is a nice place to be right now.

Trust us: this is one race that’s a lot more fun when you’re watching it from the stands.

Check the NYMEX

We don’t often find ourselves using the words “stimulating” and “government” in the same sentence, but the recently passed Stimulus Package (or The American Recovery and Reinvestment Act of 2009 [Pub.L. 111-5, PDF, H.R. 1, S. 1] if you want to get official about it) certainly has us thinking that way, at least when it comes to green energy.

Think AIG guys are the only people who got a bonus lately? Guess again: so did you. Want to know how to get it? Read on.

If you are giving any consideration to installing green energy for a bit on on-site generation…and if you’ve been reading this newsletter you know how much Cost Containment Intl. approves of this kind of thinking…the Stimulus Package has done three things which might just make you turn those thoughts into action. Basically, they boil down to this:

1. The Package removes caps on the credit for green energy projects. This is true for wind and solar…and also for previously underserved technologies like microturbines and Combined Heat and Power (CHP) systems. Previously, these credits had been capped at between $1500 and $4000, which wasn’t that much help to a commercial sized installation. Now, put as much solar up on that roof as you want, and the government will pay for 30% of it. Put up a wind turbine, whatever the size, and the government will foot 30% of the bill. Install some solar and some on-site wind…and the government will pay for 30% of all of it. The credits for microturbines and CHP is 10%.
2. You now get your government money in a form that’s useful to you. Previously, government incentives came in the form of Investment Tax Credits or Production Tax Credits. Under the new plan, a third option has been added: cash grants. The grants will now be overseen by the Treasury, and will supposedly be payable within 60 days of approval. Conversion between ITC and PTC has been expedited as well. So you can now get your full 30% back whatever way works best for you.

3. Bonus! Bonus depreciation, that is. Most projects installed in 2009 will qualify for a bonus depreciation of 50% basis value in the first year. This means you get half of the depreciation value back within a year of when your green power goes on line. This is, truth be told, money you were always going to get back, but getting it back so quickly takes some of the edge off the money you had to spend.

These are just the basics: there’s plenty more in the Package that’s of interest, like a tax deduction for energy efficiency, and if you give us a call we’ll be happy to talk about how it might affect your immediate plans. To take full advantage, you’ll want to be thinking strongly about a 2009 start date.

Oh, and don’t forget…this is just the federal incentive. Wherever you are, there are state and local incentives available to supplement the Stimulus. We’ll be happy to do the research (there are literally hundreds of different programs to consider) and give you a full report.

St. Patrick’s Day was the day for the wearin’ o’ the green. Today is the day for the installin’ o’ the green.

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Thanks to Kathie Bozzone for this week’s article.

Remember the days when a cigar-smoking gas salesman would stroll into your office with a smile on his face and a contract tucked under his arm?

Remember the days when you didn’t have to show that you pay your bills on time in order to get good deals?

Remember them? Well, they’re gone.

Credit has become the Supplier’s mantra. It used to be they didn’t care all that much…funny how a few bankrupcies over “bad debt” issues can change a person’s perspective. Today, your D&B number and associated Credit Risk Rating is the difference between a contract still stuck under your consultant’s arm (nowadays they’ve probably given up the cigars) and a signed contract bringing you a good deal.

I can’t stress enough how important a D&B rating is for your business. For those of you who think that you don’t have a D&B number, guess again. You do. And for those of you who don’t have any idea what your number is, find out. In today’s credit market, it needs to be up to date. And it better be accurate. Yes, it might not be.

Hands up…how many of you knew that “D&B” stands for Dun & Bradstreet?

D&B is the single most important credit risk gauge that Suppliers use to determine if they want to extend an offer or contract to you as a customer. I can’t tell you how many times we’ve found out about the true state of a customer’s credit AFTER the process of obtaining pricing bids has already begun. You can guess what happens next: Suppliers get cagey, good offers are taken off the table, we have to delay the process…it all adds up to good deals missed and substantial savings on energy costs lost.

What affects your D&B? It could be as minor as a few late payments, or as major as accounts that are in arrears 60-90 days.

The effects to you are substantial. Depending on the status of your credit history, you could be required to provide a deposit in order to be acceptable to a Supplier. They’ll hold this money for at least 6 months, and return it to you after 6 consecutive on-time payments. Most of us don’t have a lot of cash we can afford to take out of circulation like that.

Basically:

Good D&B = Low Risk Credit Rating = Saving money with a Supplier immediately.

Did you purchase your site from a previous owner? Have you contacted D&B to confirm your reference number and provide updated financial information? If not, you might be carrying the credit rating of the old owner. Not an ideal scenario. And Suppliers will only issue contracts in the name of the Credit Approved company. So, if you are the new owner and do not have up-to-date information established with D&B, you could be asked to sign a contract with the old owner’s name on it – probably not something you want to do!

Bottom line: do ALL of the following:

1. Contact D&B (their customer service number is 800-234-3867)and make sure that you know what your number is and that the information on file pertains to your Legal Entity name.
2. Make sure that D&B has up-to-date financial information on file for your company.
3. Even in these tough economic times, try to make sure that you have at least 6 consecutive months of on-time payments to your utility accounts.
4. Make sure that when you fill out a credit application that you provide the best possible Bank and Trade references (this are also routinely checked now).

I’ll resist the urge to tell you that you need to eat more vegetables, as well.

Finally, remember that at Cost Containment Intl. we only deal with Suppliers who have a strong bottom line. In order for them to keep that strong bottom line and be able to offer you the savings you are looking for, they can and DO check your credit rating.

Check the NYMEX

When a customer says “you guys are real bandits, you know that?” and it’s meant as a compliment, you know times have changed. Welcome to the new reality of the energy market.

This happened during an energy audit. There was a lot of potential for saving for this company: some savings would require investment, some was pretty low-hanging fruit. Nonetheless, there was clearly enough savings to be found that some of it could be channeled into an investment in a bit of rooftop solar. A small system, just enough to take the edge off of daily demand, but a good start.

Of course, the Obama administration helped. The solar incentives included in the new stimulus package give businesses a number of options for bringing down and/or recouping parts of the installation costs for solar systems. For small-scale systems, this is a good time for solar incentives. They don’t pay for everything, but again, they take a substantial bite out of the upfront cost.

(There’s more to the current plan than just solar, by the way. We’ll be looking at some of the changes in more detail in the weeks to come.)

Here’s the thing: once the system is in place, he’ll start saving from the get-go. One of the benefits of solar panels is that they generate at highest efficiency during the time of highest, and most costly, electric demand: mid-day. So they give him a way to not just reduce overall demand, but to trim peaks off his load profile. It won’t meet all his demand, not even close, but the savings will be real. And we recommended he take these future savings as they come and put them right back into some of the more impactful efficiency updates.

This was what he meant by us being bandits: we steal a bit from here and a bit from there, put it into something else, then steal what savings that gives us and use it somewhere else again. Keep being opportunistic. Keep grabbing those dollars where they appear and putting them into use creating more savings opportunities. The end result: something which had previously seemed out of reach, a few kW of solar on his roof, suddenly became doable.

This is how a lot of Cost Containment customers are going to find their way into the green energy movement: by thinking like bandits. Pirates, if you like…pirates are usually the heroes in the movies. Rather than looking for the big, one-stop solution, you steal a bit here, steal a bit there, and chip an unreasonable expense down to a reasonable one. Then jump aboard. Parrot optional.

A bit of efficiency. A bit of saving from better procedures. A tax break from the government. A bit of accelerated depreciation. A bit of incentive from the state. A bit of future savings. It all adds up to a whole new solution.

Check the NYMEX