Success Stories: Polar Vortex
Allied Hospitals and Educational Facilities Save $15 Million on Electricity Despite Record High Winter Market Using New Analytical Strategies.
Chicago, IL, JUL 7, 2014 – A group of twelve healthcare systems and related educational facilities booked long-term savings of $15 million on electricity purchases using analytics provided by Hospital Energy’s procurement program.
This past winter’s extreme Polar Vortex weather conditions caused energy rates to skyrocket throughout the nation. Nowhere were the effects felt more strongly than in the Northeast, which saw energy rates spike by more than 25 percent in many markets. While many institutional energy buyers were losing millions in budget overages, a group of non-profit institutions were actually reducing their energy costs thanks to the foresight and analytical tools made available through Hospital Energy.
By employing leading edge market forecasting and financial controls, we had identified a surprisingly positive market trend in the midst of the Polar Vortex: despite very high short-term prices, the market was actually offering bargain rates for the period 2016-2019. This led to recommendations to our clients to buy long-term energy contracts at low rates and then to bring those savings forward into 2014 using dollar cost averaging.
“ [Hospital energy’s] market forecasting and financial analytics were the key difference in reducing our energy procurement costs by more than $375,000 in 2014, with long-term savings of $2 million, when many institutions were booking significant overruns in their energy budgets,” said an executive at one participating institution. “We have been with the [the Hospital Energy program] for many years and they have consistently identified ways for our facilities to save money in good markets and bad.”
For Massachusetts members, the savings were especially strong as Hospital Energy identified an opportunity to both reduce energy costs and to avoid significant new state energy taxes by purchasing energy supply in the forward markets as far out as 2019.
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