The Seven Steps to Utility Money Management (part 1)
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The electric grid was built over one hundred years ago to provide economic advances. It accomplished that goal with flying colors. The first centralized power plant, built at Niagara Falls in the 1890’s, charged customers the equivalent of $320 per kWh when adjusted to 2013 dollars. Today, the average USA electric rate is $0.12 per kWh, a drop in the bucket. Access to cheap energy is no longer the luxury it was a hundred years ago. It is now a necessity.
Our world would halt without energy. We buy energy every time we plug into the electric grid. It provides the comforts in our homes – entertainment systems, laptops, lights and heat. It drives the economy with factories, data centers and warehouses. It gets us to work via elevators and escalators.
Energy and money are tied
Energy and the economy are intimately tied. We spend money to consume energy via utility bills. We consume energy to run our businesses and get paid from clients. Without energy, we would not have our economy. Without our economic power, we could not afford to buy energy.
Energy is invisible. We cannot touch it, see it or feel it. We have no intuition on how to quantify energy. Sure, it is measured in the kilowatt-hour (kWh). But what is a kWh? Many solutions try to monitor the resource, attempting to make the resource tangible. Even with these solutions, executive would be hard-pressed to describe what 1,000,000 kWh means to their business. Energy is a necessary, but abstract, commodity.
Money is tangible. We keep track of expenses and work to increase revenue. We are driven to maximize the bottom-line. Businesses use many century-old tools to manage money. They use profit & loss statements for quarterly snapshots, balance sheets to view current status and cash flow statements to make projections. Their uses are governed by generally accepted accounting practices (GAAP) or other accounting methodologies. As a result, every businessperson could describe in detail what $100,000 means to their business.
It turns out that in the Pacific Northwest, 1,000,000 kWh costs $100,000 to buy. Investing $100,000 is functionally equivalent to investing 1,000,000 kWh to run your business.