BUSINESS OVERHEAD COSTS ELECTRICITY. Paper CONTENTS

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1 BUSINESS OVERHEAD COSTS ELECTRICITY CONTENTS Page 1. Electricity Cost Control Energy Audits Electricity Reduction Strategies Meters Electricity Allocation... 3 ADDENDUMS A Electricity Meter Log B Analysis of Electricity Usage... 5 Page 1

2 BUSINESS OVERHEAD COSTS ELECTRICITY 1. Electricity Cost Control Businesses need to negotiate a specific agreement with an electricity vendor to avoid being charged higher tariffs. It is up to the business operator to negotiate the lowest possible energy cost with the supplier. Cost of electricity varies because of consumption patterns; tariff structures; special discounts and the electricity suppliers own internal policies. For businesses to be able to effectively negotiate with the electricity supplier, the utilisation of a cost or utility consultant can be an ideal way of achieving cost reduction without imposing a considerable time strain on management. The first task is to come to grips with all the intricacies of electricity tariffs and charging methods and secondly to spend the time negotiating with the electricity supply company. Most utility consultants receive their remuneration from the savings they negotiate on behalf of the business, thus removing from the business the fear of having to pay up front fees for a professional service without any guarantee that there will be any cost reductions achieved. There are three ways that businesses can save on their electricity bills: cutting back on the usage of electricity locating errors renegotiation of tariffs 2. Energy Audits Many businesses now engage in audits of their energy management in an attempt to reduce electricity costs and also to help preserve the environment. Electricity is a considerable cost to the business and therefore close monitoring of the costs of electricity and other sources of energy should be undertaken by management. A system should be implemented to alert management to any increase in costs. 3. Electricity Reduction Strategies Turn off lights when they are not in use. Page 2

3 Turn off the air-conditioning system at the end of the day. Review the way machinery operates in the business to determine whether a more efficient energy utilisation system could be utilised to operate the business' plant and equipment. Consider reconfiguration of the business' operations so as to use more electricity in the least expensive "off peak" periods. Make sure cool room doors and freezer doors are firmly shut. Put timers on plant and equipment to ensure that as far as possible electricity is being consumed in "off peak" periods. Turn off office equipment when not in use. Operate refrigeration equipment at the correct temperature. Install signs around your buildings: "turn off lights and air-conditioning when you do not need them" "conserve electricity" Review switchboard configuration to ensure that it is configured so as to be the most efficient user of electricity. 4. Meters A detailed log should be maintained for electricity meters installed in the business. A sample of an electricity meter log is attached in Addendum A. The recording of actual consumption by individual metres and then recording that on a spreadsheet that enables comparisons to be made to electricity consumption for that same meter in a previous month will contribute significantly to the efficient management of electricity use within the business. A summary sheet known as Analysis of Electricity Usage is attached in Addendum B. This information will enable management to highlight increased daily consumption being incurred at particular meters so that an appropriate investigation can be conducted. 5. Electricity Allocation If the meters have been allocated within individual departments that would facilitate the charging of electricity to the particular department, then the electricity cost should be apportioned and charged direct to that department by debiting Electricity, Department B. If the meters are not located so as to enable the dissection of electricity costs to the individual departments within the business, then the electricity cost should be debited to electricity in the business overhead costs section of the business profit and loss account. If the business is operating in its own premises, the electricity charges applicable to common areas should be debited to electricity, owned premises. Page 3

4 Meter No. Meter Location Date Read Date Last Read No. Days Between s This Time Last Time ption This Period Average ption per Day Addendum A A Electricity Meter Log Refer Item 4 Page 4

5 Date Meter No. Meter Location This Time Average ption per Day this Average ption per Day last Addendum B B Analysis of Electricity Usage Refer Item 4 Page 5

6 AN IMPORTANT MESSAGE The forms and commentaries contained in this paper are provided as a guide only and should not form the sole basis for any advice in relation to the particular situation of any person without first obtaining proper professional advice. This paper is provided on the understanding that ESS BIZTOOLS PTY LTD (ACN: ) will not be responsible as a result of any use made by users hereof of the forms or commentaries of this paper without first obtaining specific professional advice. Neither shall ESS BIZTOOLS PTY LTD be responsible for any errors or omissions contained in these papers. ESS BIZTOOLS PTY LTD expressly disclaims liability whether under contract or negligence and whether to a direct purchaser of these papers or to any other person who may borrow or use them in respect of any loss or damage flowing there from whether direct or consequential. In particular and without limiting the extent of this disclaimer ESS BIZTOOLS PTY LTD accepts no liability if any form or commentary contained herein, whether used in its original form or altered in some way by the user, proves not to be valid or not to attain the end result desired by the user. This exclusion shall extend both to the user and to any client of the user who may suffer loss as a result of the use of these papers and it shall apply even though ESS BIZTOOLS PTY LTD may have been negligent in the publication or preparation of these papers. The user acknowledges that it has not made known to ESS BIZTOOLS PTY LTD any particular purpose for which these papers are required and that it has not relied on ESS BIZTOOLS PTY LTD' skill or judgement to provide a paper suitable for any such purpose. INTELLECTUAL PROPERTY NOTICE The authority to use all copyright, trade marks and other intellectual property rights comprised in this paper is held exclusively by ESS BIZTOOLS PTY LTD (ACN: ). Neither these rights nor any part of this paper may be used, sold, transferred, licensed, copied or reproduced in whole or in part in any manner or form whatsoever without the prior written consent of ESS BIZTOOLS PTY LTD (ACN: ). Page 6

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