Money Back Guarantee

Money Back Guarantee

The check Greg Mattison handed to Tom Colvin in February 2004 was unique for a couple reasons. First, it was big. Not just in terms of the dollar amount printed on it ($601,151.33), but it was physically big. Like the kind you usually see Ed McMahon hand to little old ladies who answer the door wearing curlers because they weren't expecting to be greeted by a camera crew and an ex-talk show co-host.

The check Greg Mattison handed to Tom Colvin in February 2004 was unique for a couple reasons. First, it was big. Not just in terms of the dollar amount printed on it ($601,151.33), but it was physically big. Like the kind you usually see Ed McMahon hand to little old ladies who answer the door wearing curlers because they weren't expecting to be greeted by a camera crew and an ex-talk show co-host.

But it was also noteworthy because Mattison works for Facility Solutions Group (FSG), the contractor that had just finished an eight-month, $1.8 million lighting upgrade for the Killeen Independent School District (KISD) in central Texas where Colvin works as the energy manager. Typically at this stage of a project the payment would go the other way, but in this case the check was for the money FSG saved the district by taking advantage of a lucrative rebate offered by Dallas-based TXU Electric Delivery for energy-efficient retrofits.

Teachers at the 43 schools in the district had been complaining about the poor light output in their classrooms for years — most were teaching under T-12 fluorescent lamps that provided little more than half of the footcandles required by Texas public school standards — and some had even resorted to bringing in their own halogen torchier floor lamps to light the rooms indirectly. Lighting levels in the high school gymnasiums were so poor that volleyball teams from opposing schools would refuse to play there.

So for Colvin, the exchange was a big deal. The check not only represented the completion of an upgrade project he had been planning for years, it was a large reminder to his superiors that he'd saved a ton of money in the process.

On the other hand, Mattison does this kind of thing all the time. As the director of energy services for FSG he regularly finds and administers sizable rebates for energy efficient lighting upgrades in states across the country.

After taking a hiatus during the mid- to late-'90s, utility rebates are back. And with an estimated $1.2 billion in incentives available in 2004 alone, contractors looking to set themselves apart from their competitors by offering another value added service can get a lot of mileage from rebate programs if they know where to look and how to efficiently apply for them.

Get what's coming to you. Unlike many of his contemporaries, Colvin was well aware of the incentives available to him and willing to do what it took to capitalize on them. Prior to approaching the school board in early 2003 to pitch the idea of a lighting upgrade, he conducted his research and put together a proposal that included both the potential energy savings and rebate payout. For nearly five years he'd compared lamp and ballast technologies and monitored the various incentive programs at his disposal before finding a combination he was confident he could sell the school board on.

At the low end of the spectrum, TXU Electric Delivery's standard offer rebate would have helped KISD recoup $300,000 to $400,000 of their capital investment, but the utility's demand side management program, which was set to expire soon, offered as much as $700,000. And the planned lighting system of high-performance T-8 lamps would save more than $400,000 in electricity costs over the last 10 months of 2004 alone. It didn't take someone with a background in finance — of which there were two on the school board on the time — to see the plan made sense. “I attacked it from several different angles to sell it to the board,” Colvin says. “One of the businessmen took one look at the proposal and said, ‘Hey, this is a no-brainer.’ And away we went.”

Among energy and facilities managers, Colvin is a bit of an anomaly. Utilities in nearly half of the United States offer some form of rebate for energy efficient lighting installations, yet very few companies take advantage of them. Utilipoint International, an Albuquerque-based utility consultant firm, polled a group of energy managers in 2004 and found that 94% knew rebates were available but only 25% actively pursued them.

Shiva Supramanya gets frustrated when he thinks about the number of companies that pay more than they should for energy efficiency upgrades because they fail to file for rebates. His company, Energy and Power Solutions, acts as a sort of rebate consultant, helping facilities and energy managers track down the best incentives in their area. He's found that most companies lack procedures for ensuring that rebates are taken advantage of when available. “Before a capital project is approved somebody should have to check a box on a form to verify that they've searched for available rebates and found that there aren't any,” he says. “But in general, that's not the case.”

It's not only a lack of research that's preventing companies from reaping rebate benefits, though. Like the typical consumer who buys a new computer but decides not to apply for the $100 factory rebate because it's too time consuming, many facilities aren't willing to devote the resources to administer the rebate process. Although utilities are streamlining the application procedure, it still requires a pre-inspection, an investment grade energy audit, paperwork documenting the exact fixtures and lamps that will be installed, and a post-inspection.

Austin Energy, the municipally owned utility that serves the Texas capital, doesn't even bother marketing its lighting rebate program to its commercial and industrial customers. Instead it relies on the installers to take care of the application and paperwork. “When you give that stuff to the customer all that does is confuse them,” says John Luden, environmental conservation program manager for Austin Energy. “Not only that, it can be an obstacle to participation because chances are they won't even bother [if they have to do it themselves].”

TXU Electric Delivery goes so far as to require the installer to take care of the rebate application process, and it's been beneficial to both parties. The utility can rely on the contractor to market its programs and ultimately help to lower its demand side load, and the contractor can use the service to distinguish itself from competitors who might not offer it. Drew Douglas, a spokesperson for TXU, says he knows of several contractors that use rebate administration as a selling point to push them over the edge when bidding a project. “We would certainly encourage them to use that when they're trying to pitch new business,” he says. “In fact, I know a lot of contractors that use it in their advertising.”

And the utility can return the favor for the free advertising by offering a little support. Facilities managers will often want some kind of assurance that a contractor's claims about the energy savings a lighting upgrade can offer will actually come to fruition, and contractors can use the utility as a form of backup in such cases. Luden is happy to look over a contractor's proposal and ease the customer's mind about making the investment. “If the contractor tells them they're going to save X dollars, we go in and look at those numbers and verify the results,” he says. “So we provide a kind of check and balance and an objective source of information.”

Make rebates work for you. Rarely will a rebate be the sole reason a customer invests in an energy efficient upgrade, especially in the case of lighting. The typical return on investment ranges from 18 to 24 months, so Mattison has found the technology can sell itself in most cases. In fact, he says, it's the wrong reason to invest in a lighting upgrade. “Using the rebate as the reason for the project is like the logic my wife uses when she buys something on sale,” he says. “I'll ask her if we needed it, and she'll say, ‘No, but look at the price!’”

That being said, a contractor's willingness and ability to administer rebates can certainly help it distinguish itself from competitors. By the same token, installers who can't or won't take care of the paperwork and associated procedures may find themselves losing jobs they're otherwise capable of handling. “For the companies that are dedicated to the task, it just becomes part of the arsenal that they can bring to the market,” Mattison says.

The first step to making rebate administration part of your arsenal is knowing how to find the incentives. If you do most of your business in one area, keeping tabs on rebates is as simple as finding the right contacts at the utilities in your area and calling them on a regular basis to find out what programs are available and what the terms are. Because rebates are typically funded on a yearly basis, that might not require more than one phone call per year per utility.

However, the task becomes more difficult when you work in multiple states. Although headquartered in Austin, FSG does work across the country, making its call list infinitely larger. Mattison has enough work as it is without worrying about staying abreast of the constantly changing incentive programs offered by the thousands of utilities in the country, so he commissioned a computer programmer to begin building a database of every rebate in every state. Now when a retail customer wants to roll out a lighting upgrade in a variety of markets, all he has to do is search his customized database to find the applicable rebates before moving on to the more important issues of specifying lights and ballasts. “To sit there and find the utilities in the area and go to the Web or call them on the phone and ask if they have a rebate and get the forms would be a nightmare,” he says.

Once you've found the rebates, the next step is applying for them. Filling out the paperwork for a single-location project is relatively painless, but when the number of buildings reaches into the hundreds, it can become a full-time job. In fact, FSG created a position and hired someone to do just that. And when a big box retailer gives the green light for a 500-store upgrade, the resulting administrative duties related to the rebates are enough to keep that employee busy for months.

In such instances the sheer number of forms to fill out will also make it virtually impossible to process all of the applications by hand. Standard offer rebate programs are often similar in structure with the exception of the payout per kW saved, offering plenty of opportunities for automation. Custom spreadsheets that populate the correct data for each individual utility's incentive amounts can speed the process along and take a lot of manual math out of the equation.

Some utilities will offer Web-based tools for simplifying the application, but you can further reduce the amount of work necessary for your cost calculations by including steps that take into account the manhours necessary to install each fixture and the disposal rates for lamps you take out of service.

All of that work takes time and costs money, two things that you have to take into account when agreeing to administer rebates. Passing the cost along to the customer by keeping a portion of the rebate for yourself is a given, but Mattison cautions that contractors should resist the temptation to try to use it as a profit center by charging exorbitant fees for the service. Depending on the amount of work necessary to capture the rebate, he'll charge as much as 22%, but that's purely to cover the administrative costs required to handle the audits, inspections, and paperwork. “I've been in this business for 21 years, and I've found that the threshold of pain for the customer is usually 15% to 22% of the rebate,” he says. “That's usually what it would cost them to do it themselves, and if you go above that, they start screaming and they refuse to pay it.”

On the other hand, he knows of many contractors that don't charge for the service at all, which can be just as damaging. “Even if you don't do it very often, you have to realize there are back-end fees involved that can hurt your profit margin if you don't charge anything,” Mattison says.

And if you're lucky, your local utility will throw in a small perk for your troubles. Austin Energy offers $100 for every rebate-eligible project completed. Luden says it's a small way to say thanks. “It's not much, but hey, you do enough installations, it will buy you a Christmas party,” he says.

A happy customer. That oversized check Mattison presented to KISD last winter is still sitting in Tom Colvin's office, but it's not as if he needs it to remind him of the results of his five-year quest to update the district's lighting. Teachers have stopped complaining about their fluorescent-induced migraines, and he no longer walks the halls looking for unsanctioned floor lamps to confiscate. The volleyball team can even host home games again, but the jury's still out on whether the drastic improvement in the gym's overhead lighting is a good thing. “I told the coach that she'd lost her home court advantage because her players used to be able to find the lines with their feet even if their opponents couldn't,” Colvin says with a laugh.

His only regret is that he couldn't take advantage of the return on his investment from a financial standpoint. Despite his request to reinvest the rebate and energy savings into more energy efficiency programs, the school board put it into a general fund to be distributed among several initiatives throughout the district.

The money may not be his to spend, but at least he didn't have the fill out all the forms and do the energy audits to get it. One look at the paperwork TXU required for the rebate and he was happy to pass it off to Mattison. “It was a no-brainer,” he says. “It was well worth the 10% to have them do it.”

Sidebar: Four Tips for a Successful Rebate

Taking care of rebates for your customer is a great way to add value to a project, but it can also add unnecessary headaches if you're not careful. Keep these tips in mind when working with a utility on any incentive program.

  • Full disclosure — The utility is your not-so-silent partner in rebate-eligible projects, and John Luden of Austin Energy suggests getting off on the right foot by submitting a detailed spec sheet before starting. You may think you know the rebate value of each lamp and ballast, but the utility will know exactly how much each is worth and be able to confirm the energy savings you're quoting to the customer.

  • Exact change — You may have to make substitutions if you're unable to get the lamps you originally specified, but notify the utility immediately. It can be easy to forget to alert your representative in the rush to finish the project, but if the new lamp offers a slightly lower efficiency, it can slow the final inspection and lower the rebate. “All of the sudden the customer is only getting $8,227 when they were expecting $9,760,” Luden says. “If we know ahead of time, we can let them know what the rebate implications are.”

  • Coordinate calendars — When your customer is expecting a check, they'll want it as soon as possible. That means keeping the utility in the schedule loop so they can plan timely inspections and close out the transaction in a timely fashion. “It's all about good communications between the contractor and the participating utility,” Luden says.

  • Too late, no rebate — Starting a project without first submitting the rebate application will almost surely nullify any potential payout. The utility has to be able to verify the energy savings, and that's impossible if you remove and dispose of the original fixtures before getting the utility involved. “We'll try to work with the customer, but if we can't recreate the original system with absolute certainty, I have to deny the rebate,” Luden says.

Sidebar: A Texas-Sized Tale of the Tape

Pick any two rebate programs and they’re bound to look like distant cousins. For every one thing they have in common, five will be vastly different. Dallas and Austin are only separated by 200 miles of highway along I-35, but the rebate programs offered by their respective utilities are a study in contrasts.

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