Reducing costs is a priority for just about every organization today. Temporary measures can help in the short term. But a real key to effective cost reduction is to take actions that yield both immediate and long-term savings, and don't harm the organization or its customers.

One high-volume messaging organization has achieved remarkable cost savings by focusing on exactly those key goals. It is called AES/PHEAA - short for American Education Services/Pennsylvania Higher Education Assistance Agency.

AES/PHEAA is one of the nation's leading processors of student loans, providing affordable access to higher education for millions of students. Each year the organization prints and mails more than 50 million pieces of student loan and grant related correspondence.

Reducing kilowatts

AES/PHEAA took aim at a ubiquitous commodity that is often overlooked today: electricity. And as a result of its comprehensive effort, the firm has reduced its consumption - and its cost -- of electric power for its 350,000 sq. ft. headquarters building by nearly 20 percent in just one year.

That represents a savings of more than $250,000, or roughly five percent of the entire annual budget for facilities management. As might be expected, the achievement garnered the attention and support of Sandra McIntyre, Vice President of Financial Operations, and Tim Guenther, CFO.

"Our efforts to reduce our cost of electric power are part of an ongoing strategy to reduce overall operating costs," explained Thomas Hewitt, Director of Facilities. "But the weak economy, spiraling fuel prices last summer, and some recent threats to the student loan industry due to the credit crisis inspired us to push even harder to find more savings."

The bulk of the actions were relatively easy to implement. They were also arranged in a staggered fashion -- with those offering the highest potential for a fast payback scheduled first -- to yield the maximum immediate savings.

Inside the main, six-story building the Facilities team:

· Eliminated one lamp from every three-lamp lighting fixture in the building.
· Installed motion sensors in conference rooms and some offices to assure lights were off when the rooms were unoccupied.
· Turned off 50 percent of the lighting in the main-building corridors.
· Turned off 90 percent of the high-bay 400w metal halide lighting fixtures in the lobby, which is also naturally illuminated by two-story high windows.
· Raised the summer thermostat setting to 76 degrees and lowered the winter setting to 72 degrees.
· Turned off the steam to the building's hot water heating coils in the summer months.

The team made additional HVAC-specific adjustments. These:

· Improved the reaction time of the chiller (by making vane adjustments accomplished during the winter when the chiller was not in use).
· Fine-tuned the variable speed pumps on the chilled water system.
· Raised the chilled water set point by six degrees during occupied times.
· Raised the chilled water set point by thirteen degrees during unoccupied times.
· Utilized an existing control system to shut off air handlers when the building is unoccupied.

Outside the building Hewitt's team:

· Switched the lamps in the building's exterior lighting fixtures from 175w Metal Halide to 42w CFL.

In the parking garage (AES/PHEAA is located in a downtown area), the team:

· Installed photocells to assure lights are off during daylight hours.
· Replaced 175w Metal Halide lamps with 42w CFL in more than 300 fixtures. (This replacement was just completed, so the savings haven't shown up yet. Plus, separate ballasts are no longer necessary, and a longer lamp life means there will be additional maintenance-related savings in the future.)

The initial reaction from employees was mixed. "When the changes were first implemented," Hewitt recalled, "we had a few people who said the parking garage is too dark,' or the corridors are too dark,' or it's too cold' or it's too warm.'"

From a facilities management point of view, "these kinds of comments are fairly common, even when you aren't making the sweeping changes that we made this past year."

"However, once we explained what was happening and why, almost all of those with complaints understood our motivation and even acknowledged the need for such changes. Everyone understands the current business environment, so buy-in has not been a significant problem."

Up next

The Data Center and the print/mail finishing area remain unaffected - for now. "Preserving the operation of the Data Center is a vital business objective. It is not an area where we experiment or otherwise manipulate HVAC or electrical loads."

Hewitt acknowledges the Data Center offers potential to save on the cost of electricity. Indeed, Data Centers are estimated to consume one percent of the total volume of electricity produced in the U.S. However, the savings "can best be obtained via an integrated approach to purchasing new, energy-efficient data processing equipment and any related environmental controls."

Like any modern organization, AES/PHEAA relies on state-of-the-art data processing systems. It upgrades those resources regularly. When the time for upgrading arrives, the firm places a high priority on energy efficiency. "Achieving energy cost-savings for the Data Center is more part of our long term capital program than it is a Facilities project."

The print/mail finishing area is also off limits. "Due to the sensitive nature of our work processes, minor changes in temperature and relative humidity could have serious negative effects on productivity," he continued. "So we have not made any adjustments in the dedicated HVAC systems which support these business-critical operations."

Lowering the cost of kilowatts

Rather than trying to reduce the number of kilowatts consumed by the Data Center and print/mail finishing, the focus instead is on reducing the cost of the kilowatts used by those units - as well as by the entire enterprise.

"We are currently working with our Supply Management Office to develop a detailed Request For Proposal so we can solicit pricing for electricity," Hewitt explained. "The issue is not just the price, but also how we would like to purchase electricity as a commodity."

"There are a lot of options and we hope to negotiate something very soon, while the wholesale price of electricity is low. Exactly how we buy electricity and over what period of time remains undefined for now."

Still, the effort to unlock those potential savings is a top priority. "Here in Pennsylvania, we are preparing for the eventual lifting of a rate cap on electric utilities. The removal of this cap is expected to increase our costs by as much as 40 percent, beginning in January 2010. That is a huge increase and creates real urgency for us to cut usage as much as possible and to find a way to purchase electric power at a lower cost."

George Linkletter is a business journalist and marketing consultant specializing in high volume customer messaging. Contact him at: