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Facility Energy Risk Management

Sharp increases in energy prices are substantially impacting commercial, government and institutional utility customers. The US Business Roundtable, an organization of large US corporations rates energy costs as the second greatest cost pressure facing businesses today (right behind healthcare cost).

Unfortunately traditional energy efficiency investment analysis approaches like payback and internal rate of return do not incorporate uncertainty requiring decision-makers to use conservative paybacks and hurdle rates to avoid risk. However, like most rules-of-thumb, these decision rules are designed for worst-case situations, excluding many profitable investments.

Applying financial risk management tools and his 30 years of experience working with individual clients on energy efficiency issues, Dr. Jackson developed a new facility energy risk management analysis framework called Energy Budgets at Risk (EBaR)^TM . EBaR reflects an extension of Value at Risk (VaR), the widely used financial industry risk management tool, providing an analysis framework familiar to CFOs and financial administrators at many organizations. EBaR can achieve net energy cost savings of 20 to 30 percent at most commercial, institutional, government and industrial facilities while meeting risk tolerance and budget flexibility of individual organizations. Net energy costs are energy costs after making payments to finance the investment, meaning that most organizations can actually increase cash flows by adopting an EBaR strategy. (Energy Budgets at Risk (EBaR) is scheduled for publication by John Wiley and Sons in March 2008).

EBaR analysis can also include analysis of electric and natural gas pricing products in both regulated and competitive energy markets.

Dr. Jackson works with individual clients to apply Energy Budgets at Risk analysis providing efficiency investment and energy purchase strategies that meet individual budget and risk preferences and increases cash flows. He also provides EBaR workshops at client sites

For assistance in developing an energy risk management strategy for your organization contact Dr. Jackson at:

Texas A& M University Langford A318-A College Station, TX 77843 979-845-2532 e-mail

Jackson Associates P.O. Box 12340 College Station, Texas 77842 979-204-7821 e-mail