Annual Report. Utilities Business Operations University of Saskatchewan Facilities Management Division.

Transcription

1 Annual Report Utilities Business Operations November 5, 2012 University of Saskatchewan Facilities Management Division

2 Executive Summary The 2011/12 total utility costs were under budget by $642,600 (96% of the total budget of $15,291,240) and down by approximately $74,000 from 2010/11. This represents a 0.5% decrease from 2010/11 and is 7% higher than the campus five year average. The outlook for the fiscal period 2012/13 is estimated to be consistent with past years. Consumption levels of all commodities are expected to continue with the same trends as in the last five years. Prices for electricity and water increased by 1% and 6% respectively in 2011/12. The average natural gas price for 2012/13 is booked at $7.15 per Gigajoule (Gj), as compared to $7.52 per Gj in 2011/12. In 2012/13, the university s metering needs will be reviewed and various models of allocating utility costs will be assessed in support of the Transparent Activity-Based Budget System (TABBS) review and the Energy Management Program under development. Also new for 2012/13 will be the launch of monthly information based utility invoices sent to various contact people on campus. The purpose of these invoices is to make campus users more aware of the consumption totals and costs associated with the day to day operations of their campus building. Purpose of Annual Report The purpose of this document is to provide an overview of the utilities business operations for the past fiscal period, including trending information to give context, as well as provide an update on some of the key activities carried out during the year. In addition, information is provided regarding expectations for the utilities business operations in the 2012/ /2012 Fiscal Period Analysis In 2011/12 the total utility costs to the university were down 0.5% from 2010/11 and 7% higher than the five year average, for a total of $14,650,000 (see Figure 1 below), under budget by approximately $642,600 (96% of budget amount of $15,291,240) and down $74,000 from 2010/11. University of Saskatchewan, Facilities Management Division Utilities Business Operations Annual Report Page 1

3 Millions $20.0 $16.0 U of S Total Utility Costs $12.0 $8.0 $4.0 $0.0 Total Utility Costs Total Utility Budgets (Figure 1) The surplus this year was due to maintenance and wage costs ending the year $1,450,000 under budget, offset by net commodity purchases going over budget by $800,000. These variances were due to a change in cost distributions which resulted in $1,100,000 being reclassified as consumption costs and reducing the overall maintenance costs in the utilities operation. This redistribution was undertaken with the objective of increasing the overall accuracy of the university s financial statements. The remaining $350,000 maintenance variance was mainly due to the postponement of the replacement of one of the main electrical transformers located in the Agriculture Building. This transformer is expected to be replaced in the 2012/13 fiscal period. Commodity Cost Breakdown In 2011/12 the campus spent $11,109,250 for its electricity, natural gas, and water consumptions up 3% from 2010/11. The individual breakdowns are shown in Figure 2 below. Electricity made up 52% of the total commodity costs with expenditures of $5,797,450; natural gas was next with expenditures of $4,311,545 (39%); and water made up the remainder with expenditures of $1,000,255 (9%). These breakdowns are very comparable to the five year average where electricity represents 52%, natural gas accounts for 40%, and water represents 8% (see Figure 3). University of Saskatchewan, Facilities Management Division Utilities Business Operations Annual Report Page 2

4 $1,000,255 9% Commodity Cost Breakdown 2011/2012 Commodity Cost Breakdown Five Year Average 8% $4,311,545 39% $5,797,451 52% 40% 52% Electricity Natural Gas Water Electricity Natural Gas Water (Figure 2) (Figure 3) Analysis by Commodity An analysis of the electricity, natural gas and water commodities are provided below to give a better sense of reasons for budget to actual variances, how prices per unit have trended, and the proportion of commodities that are used to service our external and ancillary customers. Electricity The cost of electricity for the campus (i.e. excluding customers) in 2011/12 was $5,797,450 under budget by $3,000 with consumption being 93.6 Million kwh (see Figures 4 and 5). The electricity costs for 2011/12 represent a 2% increase over the 2010/11 period and a 9% increase over the five year average. Millions $6.0 $5.0 $4.0 $3.0 $2.0 $1.0 $0.0 Campus Electricity Costs Millions Campus Electricity Consumption (kwh) (Figure 4) (Figure 5) University of Saskatchewan, Facilities Management Division Utilities Business Operations Annual Report Page 3

5 The variance was made up of a combination of price and consumption variances as shown. Variance Budget Actual Variance F, (U) Calculation $ Variance Price $ $0.062 (U) ($ $0.062) x 94,014,500 ($28,000) Consumption (kwh) 94,014,500 93,568,314 F (94,014,500 93, ) x $0.062 $31,000 Total Variance $3,000 The 2011/12 fiscal period saw no increase in power rates from SaskPower. In the 2011/12 fiscal year the campus consumed 93,568,000 kwh of electricity, an increase of 2% over 2010/11 and up 2% over the five year average consumptions. In 2011/12 our average electricity rates were $.062 per kwh. This is an increase of 1% over 2010/11 and a 7% increase over the average costs of the last five years (Figure 6). $0.07 $0.06 $0.05 $0.04 $0.03 $0.02 $0.01 Electricty Cost Per Unit (kwh) $ / / / / /12 (Figure 6) The university purchases power at our Preston substation from SaskPower at 72 kilo volts and distributes this power to the campus as well as external and ancillary customers. In 2011/12 customers consumed 48% of the distributed power with the campus consuming the remaining 52%. Royal University Hospital and CLS are the largest external customers consuming a total of 59% of the total customer consumptions. The customer consumption is up slightly from 2010/11 and up slightly by 1% from the last five year average (Figure 7). University of Saskatchewan, Facilities Management Division Utilities Business Operations Annual Report Page 4

6 60% Electricity Consumption 50% 40% 30% 20% 10% 0% 2007/ / / / /12 External % Ancillary % Campus % (Figure 7) Natural Gas Final results for the 2011/12 fiscal period showed campus (i.e. excluding customers) consumption of 573,330 Gj of natural gas for a total of $4,311,545 (Figures 8 and 9), under budget by $734,357. The natural gas costs for 2011/12 represent a 5% decrease over the 2010/11 period and a 3% increase over the five year average. Millions $5.0 $4.0 $3.0 $2.0 $1.0 $0.0 Campus Natural Gas Costs 700, , , , , , ,000 0 Campus Natural Gas Consumption (Figure 8) (Figure 9) University of Saskatchewan, Facilities Management Division Utilities Business Operations Annual Report Page 5

7 The variance was made up of a combination of price and consumption variances as shown. Variance Budget Actual Variance F, (U) Calculation $ Variance Price $7.17 $7.52 (U) ($ $7.52) x 703,752 ($246,300) Consumption (Gj) 703, ,330 F (703, ,330) x $7.52 $980,700 Total Variance $734,400 The university forward contracts our natural gas purchases to manage fluctuations in pricing from year to year, as well as to minimize our natural gas costs to the extent possible. The amounts and timelines that can be forward contracted are governed by guidelines that have been established under the authority of the University s Derivatives Policy. When the budget was prepared 100% of the natural gas needs were booked. Increases in administration, transportation and storage costs accounted for the unfavorable price variance. This natural gas consumption level was 8% lower than in 2010/11 and 4% lower than the five year campus average. This can be attributed to the warmer than average heating season in the 2011/12 fiscal period. The heating season (October to April) in 2011/12 was 17% warmer than average and 19% warmer than the same period in 2010/11. In 2011/12 our average natural gas costs were $7.52 per Gj, a 4% increase from 2010/11 and a 7% increase from the five year average of $7.04 (see Figure 10). $8.00 $7.00 $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 Natural Gas Consumption Cost Per Unit (GJ) $ / / / / /12 (Figure 10) The university purchases natural gas and uses this commodity to produce steam. We then sell a portion of this steam to external and ancillary customers. In 2011/12 customers consumed 37% of the overall steam produced with the campus consuming the remaining 63%. Royal University Hospital is by far the largest external customer consuming 55% of the total customer consumptions. The customer consumption represents a 1% decrease over the previous period and a 2% decrease over the last five year average (Figure 11). University of Saskatchewan, Facilities Management Division Utilities Business Operations Annual Report Page 6

8 70% 60% 50% 40% 30% 20% 10% 0% Natural Gas Consumption 2007/ / / / /12 External % Internal % Campus % (Figure 11) In order to even out the campus monthly gas costs, natural gas is purchased in equal amounts every day throughout the year (2011/12 purchased 2,700 Gj per day). During the summer months excess Gj s are purchased and stored with TransGas in caverns located outside of the city. During the winter months the campus consumption exceeds the daily purchase amounts. This difference is made up by drawing the summer excess out of storage. The university s total storage capacity in these caverns is 350,000 Gj. On April 30, 2012 the university had 127,932 Gj in storage valued at $922,610. Water The final results of the 2011/12 year showed the campus (i.e. excluding customers) consuming 243, cu ft of water for a total cost of $1,000,255 (Figures 12 and 13), under budget by $234,370. The water costs for 2011/12 represent a 46% increase over the 2010/11 period and a 19% increase over the five year average. Millions $1.2 $1.0 $0.8 $0.6 $0.4 $0.2 $0.0 Campus Water Costs 350, , , , , ,000 50,000 0 Campus Water Consumption (100 CuFt) (Figure 12) (Figure 13) University of Saskatchewan, Facilities Management Division Utilities Business Operations Annual Report Page 7

9 The variance was made up of a combination of price and consumption variances as shown. Variance Budget Actual Variance F, U Calculation $ Variance Price (100 Cu Ft) $4.15 $4.12 F ($ $4.12) x 297,500 $9,000 Consumption (100 Cu Ft) 297, ,024 F (297, ,024) x $4.12 $225,000 Total Variance $234,000 The actual price of water was very close to that budgeted, resulting in a minimal favourable variance of $9,000. Campus water consumption trends have been investigated to understand the reduced consumption over the past three years and no definitive explanation has been determined. It appears that that the two periods 2009/10 and 2010/11 were anomalies and that the more normal trend has resumed for 2011/12. In 2011/12 our average water costs were $4.12 per 100 cu ft, an increase of 6% over 2010/11 and an increase of 16% over the five year average (Figure 14). $4.50 $4.00 $3.50 $3.00 $2.50 $2.00 $1.50 $1.00 $0.50 $0.00 Water Cost Per Unit (100 CuFt) (Figure 14) The university purchases its water from the City of Saskatoon and distributes it to the campus as well as external and ancillary customers. In 2011/12, customers consumed 38% of water, with the remaining 62% being consumed by the campus. Agriculture Canada is the largest customer consuming 25% of the total customer consumptions. The customer consumption represents a 1% increase over 2010/11 and a 1% decrease over the last five year average (Figure 15). University of Saskatchewan, Facilities Management Division Utilities Business Operations Annual Report Page 8

10 80% 70% 60% 50% 40% 30% 20% 10% 0% Water Consumption 2007/ / / / /12 External % Ancillary % Campus % (Figure 15) Natural Gas Contracting The university forward contracts natural gas needs which follow the natural gas year November 1 to October 31. The amounts and timelines in forward contracting are governed by the University s Derivative Policy. As of April 30, 2012 percentages booked, average prices and compliance with the policy were as follows: Target Range % Booked per Derivatives Policy Approximate Consumption Needs Booked % Weighted Average Price /Gj $ Year Gas Year 0 Nov 11 / Oct Nov 12 / Oct Nov 13 / Oct Nov 14 / Oct Nov 15 / Oct Nov 16 / Oct Nov 17 / Oct Nov 18 / Oct Nov 19 / Oct Nov 20 / Oct Nov 21/ Oct The value of the commitments as of April 30, 2012 was $33,820,000. In the past we have hedged all of our purchases with Nexen Energy using forward fixed price contracts. In 2010 we signed an agreement with the Royal Bank, and are in the process of signing an agreement with CIBC, to enable the university to undertake commodity trading with these institutions. This allows for more competitive pricing. Nexen Energy will continue to be the main supplier of the university s natural gas needs in accordance with a ten year supply contract with Nexen at $.05 above the Alberta monthly index NG price, plus the University of Saskatchewan, Facilities Management Division Utilities Business Operations Annual Report Page 9

11 transportation costs that are determined before the start of each gas year. This arrangement positions the university well to ensure our natural gas supply needs are met into the future. Energy Management Initiatives in 2011/12 As part of the university s commitment to sustainability a number of energy management initiatives are undertaken each year. The following are a few of the highlights and accomplishments that were started or completed in the last fiscal period. Heating plant boiler feedwater project - A $10 million dollar replacement and upgrading project to the campus central heating plant. The end result was increased capacity to the plant coupled with increased efficiencies in operations. Campus lighting retrofit program- Ongoing campus wide upgrade to lighting fixtures replacing old T12 lighting with more efficient T8 s. Agriculture phytotron lighting retrofit Replacement of approximately 4,000 incandescent bulbs and magnetic ballast fixtures with more efficient electronic ballasts and T5 fluorescent lamps. Health Sciences D-wing construction Construction of Health Sciences D wing was completed in 11/12 making it the first campus building fitted extensively with lighting control systems. Education building VFD replacements As part of the LEED: EBOM project the three main fans are slated for replacement with high efficiency variable frequency drives. Total project cost is approximately $220,000 with a three year payback in reduced electrical energy costs Education building water fixture upgrades All the high water consuming fixtures in the Education building were replaced. Sensors and controls were added to the urinals to limit the consumption of water when not in use. These replacements were part of the LEED: EBOM project costing $95,000 with a three year payback period. LED street light pilot project - A pilot project was started on campus last fiscal retrofitting two roadway lights and two walkway lights with an LED conversion kit. If lighting is deemed adequate for campus use the energy savings could be anywhere from 55% to 75% of the current streetlight consumptions. Infrastructure Funding Mechanisms The utilities business operations support the funding needs for infrastructure through the management of the Infrastructure Renewal Fund and the Infrastructure Development Fund. Infrastructure Renewal Fund (IRF) The IRF was established in 1997 and provides a mechanism for accumulating funding sources for infrastructure renewal projects and programs. The key source of funding for the IRF is the net revenues from utility sales to the university s external and ancillary utility customers. In 2011/12 the net revenues accumulated in the IRF amounted to $2,229,140 down 1% from the previous year and up 2% from the five year average. University of Saskatchewan, Facilities Management Division Utilities Business Operations Annual Report Page 10

12 The balance of the IRF at April 30, 2012 was a deficit of $854,338 due to the commitment made in 2006 to finance the $9.2 Million replacement of the Heating Plant chiller addition (IRF is expected to move into surplus position in 2012/13). The net revenues and expenditure projections for the IRF for the next five years are as follows (new commitments to expenditures will be identified in the later years as needs are determined): Fiscal Period 2012/ / / / /2017 Beginning Balance $(854,338) $778,500 $1,133,959 $849,627 $1,236,709 Net Revenues $2,971,838 $3,010,460 $3,070,669 $3,132,082 $3,194,724 Expenditures $(1,339,000) $(2,655,000) $(3,355,000) $(2,745,000) $(2,585,000) Forecast Balance $778,500 $1,133,959 $849,627 $1,236,709 $1,846,432 Infrastructure Development Fund (IDF) The IDF was established in 2008 and provides a mechanism for accumulating funding sources for infrastructure expansion projects. The key source of funding for the IDF is from a fee called the Infrastructure Development Charge, a flat 1% charge applied to any capital project that results in new space. In 2011/12, the IDF fund collected charges for a total of $663,300 and $1,541,000 was distributed to infrastructure expansion projects. The IDF balance on April 30, 2012 was $1,856,160. Forecasts of yearly contributions are based on current active projects that have Board 1 or 2 approval. The contributions and expenditure projections for the IDF for the next five years are as follows (forecasts of yearly contributions are based on current active projects that have Board 1 or 2 approval and new commitments to expenditures will be identified in the later years as needs are determined): Fiscal Period 2012/ / / / /2017 Beginning Balance $1,856,160 $1,807,160 $1,218,160 $778,160 $778,160 Yearly Contributions $551,000 $161,000 $10,000 $0 $0 Expenditures $(600,000) $(750,000) $(450,000) $0 $0 Forecast Balance $1,807,160 $1,218,160 $778,160 $778,160 $778, /13 Outlook The outlook for the 2012/13 fiscal period can be best described as consistent with the past. Consumption levels of all utilities are expected to follow the trends of the last five years plus additional levels due to the addition of Health Sciences D Wing. Electricity consumption is expected to increase by 3%, natural gas consumption is weather related and, as such, difficult to predict, and water consumptions are expected to return to normal. Pricing levels are, for the most part, expected to continue the trends seen over the last five years. Electricity rates are expected to increase by 4.9% effective January 1, 2012, water rates are estimated to increase by 7.5% effective January 1, 2012, and the average natural gas price will be slightly lower at $7.15 per Gj, as compared to $7.52 per Gj in 2011/12. Maintenance costs in 2012/13 are estimated to be on budget as we aggressively pursue some of the deferred maintenance issues that have been postponed in the past. On August 21, 2012 the University of Saskatchewan signed a contract with Twin Eagle Resource Management to be the supplier of the natural gas to our small meter accounts. The contract starts November 1, 2012 and runs through to October 31, These accounts are currently being supplied by Sask Energy. Given the current consumption rates on these meters this contract has the potential of saving the university approximately $50,000. University of Saskatchewan, Facilities Management Division Utilities Business Operations Annual Report Page 11

13 We will focus on several initiatives in 2012/13: Utility Metering The university s metering needs are being reviewed within the context of Transparent Activity-Based Budget System (TABBS) as well as the Energy Management Program under development. A Meter Replacement Program has been developed and will be put into action during the 2012/13 fiscal period. Campus Building Energy Contact Initiative An energy management initiative was started in 2011/12 identifying key energy individuals for each building on campus. These individuals will be sent monthly energy consumption figures for their respective buildings to increase the awareness and importance of energy conservation moving forward. This list of people will also serve as a source for troubleshooting not only consumption variances, but also any operations and maintenance issues that may come forward. Information based invoices with information on consumption and associated cost to the university have been developed and sent out to a few select individuals for feedback. Response has been very good. After completing a few small changes to the format, invoices will be sent out monthly for all buildings. University of Saskatchewan, Facilities Management Division Utilities Business Operations Annual Report Page 12