How Safeway turned energy management into a competitive edge

How Safeway turned energy management into a competitive edge

By taking a centralized approach to managing energy sourcing -- just like any other enterprise process -- companies can identify real savings and reduce operational risks, according to the energy management team at grocery giant Safeway.

Over the past 14 years, Safeway has completely overhauled the way energy is procured and managed throughout roughly 2,220 facilities—a transformation detailed during a recent GreenBiz Group webcast titled "Turning Energy Data Into Dollars.”

Along the way, the company cut costs by aggregating electricity purchases across certain parts of the Northeast (Maryland, Delaware, New Jersey, Pennsylvania, Illinois and the District of Columbia) and forging long-term agreements with generators in California and Texas, among other strategies.  

To do this, it actually applied with the Federal Energy Regulatory Commission in order to act as a wholesale purchaser, which moved Safeway beyond spreadsheets to investment in energy management software and services.

"We discovered it is better to control our own destiny rather than allow an organization such as a utility to make decisions on our behalf," said Doug Condon, a member of the Safeway energy operations team, during the webcast.

One great example of how Safeway treats energy management as a strategic function involves its approach to the California market.

Concerned about long-term risks to depending on a supply out of its control, the company opted to enter into a contract under which one company provides another with a fuel supply so that it can be converted into another fuel on its behalf. Under this agreement, Safeway purchases natural gas in lieu of electricity, then leases capacity with a generator to turn it into power and deliver it to the grid, Condon said. It also forged a long-term agreement with a generator in Texas.

The result of both relationships has been a risk-managed approach that allows Safeway to procure the electricity it needs at multiple fixed prices, Condon said.

In the Northeast, Safeway focuses on buying from two delivery points, which simplifies the number of relationships it must manage, eliminates retail markups and cuts out unnecessary risk premiums, he said.

Photo of sprinter getting ready to start race provided by Peter Bernik via Shutterstock

First, get a grip on the data

Getting to the point where it could negotiate these relationships was not a trivial process. Before Safeway could think strategically about competitive energy procurement, it had to better understand what it was using – and spending.

Collecting this data has been a largely manual process that involved gathering and entering information from accounting spreadsheets and paper invoices. "The industry wasn't prepared to give us what we were asking for," said Emma Lin, another Safeway energy operations team member.

The process became simpler in California (home to the highest concentration of Safeway stores in the U.S.) after Safeway invested in purpose-built UtilitySync cloud services from energy management company Hara. The company captures virtually all the data points included on utility invoices, including taxes and bond charges, Lin said.

The process isn't entirely automated. Some utilities, specifically Southern California Edison and San Diego Gas & Electric, would not agree to provide the data electronically without requiring Safeway to agree to pay for its power through EDI payments. That has been a challenge, she said.

Moving forward, Safeway is setting up similar accounts for utilities outside of California, which will provide much better visibility into trending data – including the effects of weather.

In addition, the company plans to track electricity usage and spend on a facility-by-facility basis (where it makes sense) so that it can benchmark best practices and identify and address outliers. That will involve phasing in hourly or smart meters that can provide more information on an almost real-time basis, Condon said.

Next, calculate your company's true energy costs

Strategic energy management involves far more than just keeping tabs on utility rates, said Hara CEO Dan Leff during the webcast.

That's because many companies fail to account for the complexity of managing large numbers of utility suppliers, the personnel needed to keep tabs on those relationships, systems for bill processing and administration, and the equipment it takes to improve energy efficiency, he said.

Yet, by considering the energy function holistically, companies that are in non energy-intensive industries can find potential operational savings of 5 percent to 20 percent, Leff estimated.

"Combined with the sustainability benefits, this is the call to action," he said.