Energy… Can We Do Anything? “The University of Calgary Perspective”

1. Energy… Can We Do Anything?“The University of Calgary Perspective” CAUBO 2004 June 18, 2005

2. University of Calgary Supply Management Strategies

3. Traditional Procurement • Identify a requirement; • obtain at least three quotes for a stipulated sum; • award to lowest bidder meeting specifications (e.g. one time contract or supply).

4. Strategic Partnership • Principle driver – a need to do business differently! “We cannot do the same things over and over again and expect different results” (RR) • Alter the way in which we do business; are visionary and the vision, principles and values drive the business relationship; • Create new business paradigms; • Business relationship may extend beyond non-core activities and there may be “an integration of service” delivery; • The partner may undertake strategic sourcing initiatives (and other procurement strategies) to fulfill the changing requirements of the partnership; • Select partner through competitive process; seeking and award on the basis of alignment of vision, corporate capability and innovation – “merging of the value chain”.

5. Strategic Partnership Guiding Principles Whenever the circumstances support the use of a Strategic Business Partnership approach, the University will adhere to the following principles: • Partnerships shall respect the principles of academic freedom. • Partnerships that directly affect students shall add value to the student experience. • Partnerships shall be cross-institutional in nature and shall be undertaken in the spirit of what is best for the University. • The process for selecting a Partner will be open and transparent and as such, the Partner will be selected through a competitive process. • The Partner, in addition to offering competitive pricing, shall be expected to provide significant support to the University specifically by investing in priority areas consistent with the vision, mission and priorities of the University as identified in the Academic Plan.”

6. Traditional Energy Procurement • Identify energy/ utility requirements (deregulated environment); • obtain at least three bids: • Examples • Fixed Forward Pricing • Indexed Forward Price (Tolling Agreement) • Select and award on basis of lowest “projected” cost

7. Energy Sustainability and Building Technologies Strategic Partnership The coordinated approach to all aspects of this energy continuum will derive synergies for sustainability that otherwise could not be achieved through a dispersed approach to procurement, planning and utilization. University of Calgary

8. Partnership Factors The decision to engage a partnership model for the supply of energy was based on: • De-regulation (natural gas 1986 and electricity 1995). • Emergence of a competitive environment - electricity supply (2004) • The complex variables impacting the consumption of energy. • Volatility of energy costs while the University budget had to be predictable. • A huge consumer of energy (Energy costs as well as dedicated management resources represent a significant portion of the operating budget i.e. approximately $20 million annually just on electrical and gas utilities). • Dependency on highly reliable and high quality energy supply. • A successful partnership having the potential to enhance the University’s international image of excellence and leadership in management and delivery of energy and related services. • The potential to enhance education and research through public/private partnership. • The University was launching a major Sustainability Initiative is to develop a comprehensive decision-making and risk management framework to guide the University of Calgary toward its goal of being an economically-viable, and environmentally- and socially-sustainable institution.

9. Partnership Drivers • Introducing and demonstratingnew best practices for reducing energy and building operational costs and increasing the value to the institution by: • satisfying University operational requirements (reduces operating costs and improves quality of building environments) • creating a new business model that promotes energy and environmental sustainability • creating value added benefits from long term business commitments that will support: • Academic learning (a living lab) • Research opportunities • Student achievement and scholarship • raising the global stature of the University

10. Energy and Building Technologies Strategic Partner Values and Qualities (From the RFP) The University is seeking a strategic partner that: • stands out as an energy business leader; • can perform the full range of planning, technical, business and operational capabilities to undertake that function in a highly professional way; • is prepared to assign highly capable and experienced people with the requisite skills and experience; • can be trusted to fulfill the duties that are delegated to it as indicated by a solid track record of business performance; • is innovative in finding ways to save money and in creating value for the university and the community in which it operates. • is known for its high ethical business and financial standards; • can assemble the necessary expertise internally or with a consortium of partners to deliver the requirements of the University; • will demonstrate commitment to the mission of the University, its Academic Plan and specifically to one or more of the University’s stated priorities; • is a leader, in its own right, in the field of energy research and development; • demonstrates significant expertise and skills in project management, project implementation and energy procurement; • is held in esteem for its energy sustainability standards and policies; and, • has significant financial backing, or access to on preferred terms that will offer it major stability in partnering with an established public university.

11. Partnership Deliverables Operational Improvements - implementation of Programs will derive economic and other synergies related to the Sustainability Attributes that otherwise could not be achieved through a dispersed approach to planning, procurement, construction and utilization: • Millions of dollars worth of competitive margin savings on O&M/small projects and the building technologies component of major capital projects over 7 years.  Savings will be re-invested into higher standards for energy sustainability and building technologies. • $6 million annually in energy savings from year 4 onwards The savings will be directed towards repayment of energy performance initiatives and towards refurbishment of the Central Energy Facility.  • Simple payback for the energy performance initiatives in Campus Infrastructure is approximately 4 years.

12. Partnership Deliverables Energy and Building Sustainability • Building management technologies will increase building efficiencies and create more usable and user compatible space • Consumption of natural resources will be reduced • Energy sustainability standards e.g. LEED, Energy Star, ISO 14001 will be established and followed • Strategic energy and energy facilities planning will result in “programs” that will provide reliability requirements planning and segmentation, time of use metering and load management, cogeneration and environmental credits • Energy procurement, contracting and risk management will reduce the cost of utilities • Regulatory compliance will be enhanced the coordinated planning and performance measurement • Retrofitting existing building and fitting new buildings will be done to selected standards; • Alternative energy sources will be identified and utilized

13. Partnership Deliverables Value Added - investment will be made by Direct Energy in academic and research initiatives over the next 7 years • Investment in the University’s stated priority: Institute of Sustainable Energy, Environment and Economy(ISEEE) • Support students: Academic Merit Scholarships • Provide career related jobs for students

14. Partnership Deliverables Global Stature • a living, working environmental sustainability model that can be modeled • a Centre of Sustainability Excellence

15. Book of Business Work Projects completed by Direct Energy will include: • Sustainability sub-consulting and sub-contracting elements of Major Capital Projects • Project Management of O and M and Small Capital Projects < $1,000,000 using design/ build methodology • Management of commodities including gas and electrical utilities, building service contracts and systems labour workforce

16. Merging of the Value Chains