Energy Sentinel Never Sleeps

By STACY WONG Courant Staff Writer

April 4 2004

Each workday at 6 p.m., after nearly everyone has left the state Department of Public Utility Control's quarters in New Britain, power to the building's vending machines automatically shuts off.

At 6 each morning, the power automatically comes back on.

During the past year, the vending-machine shutoffs and some judiciously timed dimming of lights have trimmed about $300 a month off the regulatory agency's electricity bill - while still giving the staff access to munchies and cold beverages.

The savings have also provided revenue to Nxegen Inc., a small Middletown company that installed the power-saving switches and monitoring equipment.

The company's cut is roughly half of the $300 in monthly savings it achieves for the regulatory agency. That's about 5 percent of the average $6,000-a-month electricity bill for the 64,000-square-foot building.

The annual savings of $3,600 may not be much to a state with an annual budget of more than $13 billion. But Nxegen officials believe that kind of cost reduction - achieved without compromising vital functions - would be significant to a midsize business or institution.

"It's not a heck of a lot [of electricity], but they don't notice it. But that's the beauty of our offering," said Gary Lane, Nxegen's vice president of sales and marketing.

The privately held Nxegen is banking on customers such as commercial building owners and their tenants, small and midsize industrial firms, schools and colleges, and governmental clients such as the DPUC.

Its roster of about 300 clients includes Webster Bank, commercial-property owner Northland Investments, and the cities of New Haven and Norwalk.

But margins in the residential market are too low to make homeowners a target, industry experts say, and Nxegen's challenge will be to find a cost-effective way to market itself to the midsize niche.

Moreover, at a time when both business and government budgets are tight, it can be difficult to persuade potential clients to make even small investments in new technology.

Nxegen contends its timing is good in Connecticut because electricity bills went up last year, and are expected to rise again this year. And the more Nxegen's customers save, the more the company takes as its cut.

Industry experts said Nxegen's 24/7, high-tech energy-monitoring system - the heart of which is a wireless, two-way telecom network - makes the company unique in the $1.2 billion energy services industry.

Companies such as Honeywell and Select Energy target larger customers and generally don't do extensive real-time energy monitoring.
Select, a subsidiary of Northeast Utilities, targets big federal government clients such as the Department of Defense and the Army Corps of Engineers, Select officials said.

It also has large institutional clients, such as St. Francis Hospital and Medical Center in Hartford, where it installed a 200-kilowatt fuel cell last year to produce some of the hospital's own power.

The midsize market Nxegen is targeting has good growth potential because it remains underserved, said Chuck Goldman, who heads the electricity and markets policy group at the U.S. Department of Energy's Lawrence Berkeley Laboratory in California.

But Nxegen will have to find creative ways to go after that market, he said. "If you go customer by customer, you'll go broke. It'll cost too much money to acquire them."

Lane, the sales and marketing chief, said Nxegen now is working mostly in Connecticut and Massachusetts, with an eye toward the rest of New England and New York state.

Without advertising, the company gains business mostly through word of mouth and by selectively targeting potential clients.

Revenue comes from various sources - including a percentage of energy savings achieved for clients, payments for monitoring client energy use, the installation of energy-saving equipment and checks on the accuracy of clients' electricity meters and bills.

State Consumer Counsel Mary Healey - the chief consumer advocate in electricity and other utility issues - is a fan of the company's work.

She championed Nxegen's pilot project at the DPUC building, where her staff is housed.

The company was founded six years ago by four people, two of them former Northeast Utilities employees. Today it has more than 40 employees.

Lane declined to disclose the company's revenue, but he said Nxegen expects to become profitable this year.

He said the company's real-time monitoring system pinpoints times when energy use can be reduced without affecting operations. It can be fine-tuned if initial adjustments aren't just right or if needs change.

Webster Bank can control when copiers, lights, fax machines and other electronic equipment go on and off in 44 of its 120 buildings.

"It gives us much more control over all of the variety of things we have in our buildings," said Peter Olson, the bank's senior vice president of corporate real estate.

Nxegen has saved Webster 8 to 10 percent a month, Olson said. Now the bank is considering adding monitoring devices for exterior lights and heating systems.

Nxegen separates itself from the performance-contracting industry, which typically fronts the money for extensive capital improvements, such as window and boiler replacement, then takes a cut of the energy savings over many years.

Nxegen doesn't have that kind of capital, and instead focuses on its monitoring network and the expertise of its staff to sniff out savings.

Some of those staff members are former utility employees who use their understanding of Connecticut's complicated rate structure to custom-design the energy plans.

Some clients, for example, have been advised to shift energy consumption for some tasks to hours when commercial rates are lower.

A wastewater processor that uses a big motor during hours when rates are lower can save thousands of dollars a year, Nxegen officials said.

"Mostly, they want a better understanding of what is driving their costs," Nxegen President Erik Bartone said.

But he said, "What we're finding is you've got to be non-intrusive."

Nxegen initially powered down the DPUC's vending machines too early to suit one late-working DPUC commissioner, who was irate that the sodas weren't cold enough.

So from its control room in Middletown, Nxegen moved the shutoff time back an hour. There haven't been any complaints since - even from early-morning arrivals.

And that's in a building where Diet Coke is a popular source of morning caffeine. "I see people getting them for breakfast," DPUC spokeswoman Beryl Lyons said.

She said most staff members don't even know the vending machines are turned off at night. The power comes back on from midnight to 1 a.m. to prevent beverages from getting too warm before the 6 a.m. restart.

The tough part about serving the government market is that when budgets are tight, as they are now, many officials are reluctant to try something new or invest in new technology.

Despite Nxegen's savings for the DPUC, no additional state work has come its way.

But the company recently received a $2 million federal grant to install "smart meters" in 500 to 1,000 municipal, commercial and industrial facilities with high energy costs.

The meters will let customers monitor their energy use and design a conservation program that will save them money.

The General Assembly is also considering legislation that would require "green building" standards to incorporate energy efficiency into new state government buildings.

These requirements, if approved, could provide additional opportunities for Nxegen. Energy experts said there's still much more that can be done to improve energy efficiency.

"I think you'll find there's a lot more potential out there," Connecticut energy consultant Joel Gordes said.

"There used to be arguments that we've done as much as we can in Connecticut. Well, that's like saying technology is standing still."

Copyright 2004, Hartford Courant