By Dan Orr | Jan 27, 2012
To understand how our utilities affect our bottom lines, we’ve got to understand our utility bills. Since I’m often asked to do analyses on energy savings, I’ve gotten a lot of practice at reading natural gas bills. In this article, I’m going to share what I’ve learned.
I find it useful to track four elements of natural gas bills: (1) the amount of natural gas used per month, (2) the amount of money paid for natural gas each month, (3) the cost per unit of natural gas per month and (4) gross sales per month.
However, the majority of laundry owners I speak with track only Numbers 1 and 4 – the amount paid for natural gas and gross sales. Invariably, I’ll get a phone call when costs go up relative to sales. But, without knowing the other pieces of information, I’m at a loss to say why. So here’s how to collect and understand those other two meaningful elements.
We all know how to identify the amount due on a gas bill. So let’s work on identify the amount of energy utilized in the period of time covered by the bill.
First, we clear our minds. Seriously, what I mean is ignore extraneous portions of the gas bill. There are taxes, fees, the cost of the energy delivered and the cost of the delivery of that energy. All of these may or may not be divided into line items covering minimum charges, others involving various increasing levels of usage, and still others for energy used on third Tuesdays of alternating months in non-leap years.
Let’s forget it all. Sorting out delivery charges from energy charges is important for those in the business of buying energy from non-utility dealers. (Anyone in that business, including many coin laundry owners, should already know everything in this article.)
Second, we focus our laser-like attention to the amount of energy utilized in the period covered by the bill. Crucially, this portion contains the current meter reading (along with the date it was taken) and the previous meter reading (along with its date). The amount of natural gas used is the difference between the current reading and the previous reading. So much is straightforward.
What’s not straightforward are the units used in those readings, their relation to the amount paid per unit of energy, and what in the heck it all means. Here’s where things get a little funky.
Natural gas usage is measured by gas meters in terms of hundreds of cubic feet, designated as ccf, or thousands of cubic feet, designated as mcf. On natural gas bills, numbers of ccf or mcf may be displayed, or another entirely different-sounding unit called therms may be displayed instead. Some bills show both. That’s confusing, right? It won’t be if we commit the following to memory:
1 ccf (hundred cubic feet) of natural gas is (near enough) equal to 1 therm. *
1 mcf (thousand cubic feet) of natural gas is (near enough) equal to 10 therms. **
In other words, we’ll read “therm” every time we see ccf, and we’ll read “therms x 10” every time we see mcf. Now we have a standard terminology based on therms.
What’s so great about therms? Translating into therms is great because it translates between a meaningless quantity (the cubic footage of a stinky gas) to meaningful quantity (the amount of heating work that stinky gas can do). A therm is equal to 100,000 BTU, and a BTU is a unit of heat energy. Driers, water heaters, boilers and gas-fired unit heaters are all rated by their maximum BTU per hour inputs. If our 199,000 BTU/hour water heater fires for a complete hour, it consumes approximately two therms of natural gas.***
Now that we can identify the amount of energy used on a given bill in terms of therms of natural gas used, how can we determine the cost of each therm? That’s easy – we divide the total amount due by the number of therms used. If our bill is $3,000 and our facility consumed 3,260 therms, our cost is 92 cents per therm, which was the approximate average commercial price paid by consumers in New York State between January and October 2011. (See http://www.eia.gov/naturalgas/monthly/).
We can now track the four pieces of information that are really important: (1) the amount of natural gas used per month, (2) the amount of money paid for natural gas each month, (3) the cost per unit of natural gas per month and (4) gross sales per month. We are in a position to answer the really important question we all ask: Why are we paying more for gas? Here are a few reasons why we see increases:
The seasons be a’changing. When it’s colder, driers have to do more work to heat colder air and water heaters need to do more work to heat colder water. Water temperatures can vary by 40 percent by season and air temperatures vary by much more. And heating systems turn on.
Gas prices are going up. This actually shouldn’t be happening. In fact, real natural gas prices (adjusted for inflation) have not – with a few event-related fluctuations (e.g. Hurricane Katrina) – increased much in the last 30 years.
Sales are going up. Hooray!
The efficiency of our equipment is decreasing. Traditional tank-type water heaters decrease in efficiency over time. Dirty combustion equipment, exhaust systems and fresh-air intake systems cause efficiency decreases.
Only by tracking the total cost of gas used, the amount of gas used and the unit cost can we determine why our bills go up.
* One hundred cubic feet (1 ccf) is a volume of natural gas, and a therm is a measurement of potential energy. The amount of potential energy in 1 ccf is usually around 1.02 therms, but this can vary slightly from utility to utility and from time to time. So, our near enough equivalency should never be more than 2-3% in error. That’s not bad, and so long as we make the same error consistently, it won’t matter to us.
** The amount of potential energy in 1 mcf is usually around 10.2 therms. There’s our 2% error again. No big whoop.
*** For technophiles: a BTU is defined as the unit of energy required to heat 1 pound of liquid water 1 degree Fahrenheit. One gallon of water weighs 8.33 pounds. So, to heat 100 gallons of water from 40 to 140 degrees, we need to add 83,300 BTUs to the water. An 85% efficient water heater must burn 98,000 BTUs to achieve this.
Terminology for liquid propane: Liquid propane is generally measured in gallons. One gallon of liquid propane contains approximately 91,690 BTUs. It’s important to know this because comparing a gallon of liquid propane to a ccf or therm of gas is not an apples-to-apples comparison. A gallon of liquid propane contains 8% less energy than a therm of natural gas.