When The Utilities Cut You Off
American Crystal Sugar Company (ACS) is an agricultural cooperative involved in the growing and processing of sugar beets. It operates five sugar factories in the Red River Valley (northwestern Minnesota and eastern North Dakota) and one plant in Montana under the name Sidney Sugars, Inc. Headquartered in Moorhead, Minn., ACS is the largest beet sugar producer in the United States and employs nearly 1,700 full- and part-time employees.
As a leading food manufacturing company, American Crystal Sugar relies on continuous production at its operating facilities. Interruptions in the sugar beet processing at any of its six facilities can negatively affect bottom line profits through a waste in production efficiency and resources.
Of the six facilities operated by American Crystal, four are primarily powered by natural gas. Each of the ACS plants powered by natural gas often struggled with local utilities to receive a reliable and cost effective energy supply. Through a process called “curtailing,” utilities would reduce or completely prohibit the amount of natural gas an American Crystal Sugar facility could use during times of peak demand. If curtailed, the facility would have to switch its burners to a backup energy supply, which can be expensive and delay production. During a typical year, it would not be uncommon for one or more of the company’s sugar processing facilities to be curtailed by a utility as much as 30 times, deeply affecting plant efficiency.
After years of struggling with utilities for reliable and affordable natural gas delivery, American Crystal Sugar turned to Minneapolis-based energy management firm, U.S. Energy Services (U.S. Energy). As one of the nation’s leading energy management companies, U.S. Energy Services worked closely with American Crystal Sugar Company to evaluate how it obtains natural gas for each of its facilities and looked for alternative methods for reducing costs while increasing the reliability of its energy source.
“Many companies don’t realize that they may have the opportunity to obtain natural gas through avenues other than their local utility,” according to Sandy Zoulek, account manager at U.S. Energy Services serving American Crystal Sugar Company. “The truth is, food manufactures like American Crystal Sugar have options in both the pricing and delivery of natural gas, and those differences can often result in significant savings.”
In fact, U.S. Energy Services is known in the energy industry for its ability to review client’s energy procurement strategies and identify options to reduce energy costs through a number of different strategies and services. As experts in the natural gas industry, U.S. Energy negotiates with utilities on behalf of its clients to ensure they are receiving the lowest possible rates available. These negotiations often result in notable reductions in energy costs. After examining all options, which may include directly connecting to the pipeline by bypassing the utility and evaluating many natural gas suppliers, U.S. Energy provides clients with recommendations that best fit their energy needs as well as their budget.
In the case of American Crystal Sugar, U.S. Energy Services provides a complete tariff review for each facility location, outlining energy strategies that include reduced rates from the utility and creative procurement tactics that protects facilities from future curtailing (i.e. buying gas at specific points on the pipeline for increased reliability in delivery).
In addition to energy procurement strategies, U.S. Energy Services provides American Crystal Sugar with a number of other daily energy services, including price risk management through a fixed-price hedging program, which provides the client price certainty for its future gas pricing. U.S. Energy also provides data management which includes the review and reconciliation of the invoices generated during the purchasing process.
As an additional cost-saving measure, U.S. Energy Services handles all energy purchases on behalf of its clients. Energy purchases made by American Crystal Sugar through U.S. Energy are sent to as many as six natural gas suppliers for competitive biding. By creating competition in the marketplace, U.S. Energy is able to ensure the lowest possible energy costs for its clients.
“It was our priority to not only reduce the company’s energy costs but to provide their facilities with greater energy reliability,” explained Zoulek. “After performing tariff reviews for each facility, we implemented strategies that provided overall cost savings as well as alternative purchasing methods that ensures their facilities have the options to receive affordable and reliable natural gas supply.”
American Crystal Sugar has been a U.S. Energy Services client for more than 10 years. During that time, American Crystal Sugar facilities have seen significant reductions in energy costs at each of the four facilities powered by natural gas. On average, annual savings in natural gas expenses can be equated to more than $150,000 at some facilities.
“For a company of our size, it makes sense to utilize the expertise of energy professionals,” explains Bruce Meidinger, Purchasing Manager, American Crystal Sugar. “Each of our facilities differs in the scope of their energy needs and the energy resources available in each geographic area. U.S. Energy provides a valuable service by producing the best energy strategy for each location.”
In addition to sizable energy cost savings, each facility has a reliable energy management strategy, which allows plants to operate without interruption from costly utility curtailments. With the variety of energy strategies made available by U.S. Energy Services, American Crystal Sugar plants are able to receive the lowest natural gas prices with the highest level of reliable service.