A strategic decision made three years ago—to build an in-house utility plant that would provide thermal energy to heat and cool the Connecticut Convention Center (CTCC) and other elements of the Adriaen's Landing development in downtown Hartford—is paying off.

With energy deregulation sending electricity prices soaring, and more increases set to take effect in January, the owners and managers of the convention center and Marriott Hartford Downtown are reaping a variety of financial and operational benefits from its 9,500-square-foot Central Utility Plant, located at the rear of the convention center's mezzanine level.

The recommendation to build a separate energy plant for the Adriaen's Landing projects came from SourceOne Inc., a private utility company with offices in Boston, New York and Houston.

Hired by the Capital City Economic Development Authority (CCEDA), the convention center's owner, in August 2002 through a competitive bidding process, SourceOne set out to help CCEDA and the other parties involved in the process determine how much energy the entire development would require, how to achieve optimum energy efficiency, and how to best meet the needs of the individual properties that would make up Adriaen's Landing. That process began before the designs for the convention center and hotel were even complete.

CCEDA could have opted to buy its energy from its neighbor at 60 Columbus Blvd., The Hartford Steam Co., which provides heating and cooling services for roughly 85 percent of the Class A office space in downtown Hartford, according to its website.

But Mike Byrnes, general manager of SourceOne's New York operations, says his company felt the costs outweighed the benefits. "Pricing was the stumbling block," he says.

Instead, SourceOne — which already had experience with the effects of energy deregulation in New York and Massachusetts — convinced CCEDA to build its own plant, using a design that would not only save the agency money, but provide maximum reliability and dependability. It would also offer capacity for expansion as other parts of Adriaen's Landing were built.

"At the end of the day, we found the best way to do it was to have one central facility," says Byrnes. "It's the most efficient and cost-effective way for them to get energy." In addition, having a single plant reduced the necessary manpower, and the environmental impact.

There was also plenty of discussion about what kind of plant it should be. Byrnes says the typical route at that time was to install only electric-powered equipment.

On SourceOne's recommendation, however, the thermal energy plant was equipped with a hybrid system, consisting of two electric chillers and one steam-fired absorption chiller, which converts steam to chilled water.

It wasn't an easy sell, particularly since the additional cost to build a hybrid system was estimated at $200,000. "But we pushed hard and said, ‘You want a hybrid chiller, if you want to have economical operation and reliability,' " Byrnes remembers.

That decision has paid off. Now, with electricity prices moving steadily upwards, and oil and gas prices still volatile, CCEDA can save money with the flick of a switch.

When electricity is deemed more expensive, Byrnes notes, the system can be fired using low sulfur oil or natural gas, depending on which is cheaper. "We can completely come off of the electric grid for chilling," he says, adding, "We make those decisions almost on a daily basis, and switch back and forth for economy. That gives the plant both operational and economic flexibility."

It also reduces the agency's exposure to supply volatility in the energy market, says Tom Galvin, SourceOne's Vice President of Marketing.

He says because his company had seen deregulation in Massachusetts and New York result in higher energy and distribution costs, it made sense, in advance of Connecticut's deregulation, to choose a "less consumptive technology and diminish your risk to upward pressure on pricing, which is really what CCEDA did here."

To offset the additional capital costs, SourceOne also helped CCEDA negotiate approximately $200,000 in rebates from the gas company, which normally sells less gas in the warmer months. So in the end, CCEDA came out essentially even in terms of construction costs.

Byrnes explains that the plant works much like a co-op, with energy as the commodity that is bought and sold. The Marriott signed on as a customer, and the Connecticut Center for Science & Exploration is expected to follow suit.

"As we get closer to the date that they're going to open, we expect to sign an energy services agreement with them as well, and obviously they'll be part of the overall plan for the project," says Annette Sanderson, CCEDA's executive director.

She says the mixed-use Front Street development, slated for construction across the street, will not be a customer.

Bob Saint, project director for Waterford Development LLC, which built the 400-room Marriott and the 220,000-square-foot convention center (Waterford Group also manages the CTCC), says his company made the decision to obtain its energy from CCEDA after studying alternative options.

He's pleased with the cost-savings achieved through this approach, pointing out that the plant allows the adjoining buildings to save money by sharing the redundancy required as a backup in case of equipment malfunction. "There are efficiencies involved in being able to do that," he says.

"We studied it and found that this was the most cost-effective way, long term, to provide heating and cooling for the two facilities."

Because the plant's capacity can be expanded, he adds, phase two of both properties, currently in the planning stage, can also be powered by the Central Utility Plant, or CUP. "We can add another boiler, another chiller, another cooling tower to boost the capacity to handle [the needs of] the science center or the projected phase two of both of these facilities."

Saint says the CUP currently provides enough capacity to air-condition 601 2,000-square-foot homes on a 90-degree Fahrenheit day, and enough capacity to heat 1,650 2,000-square-foot homes in the winter, including domestic hot water.

Depending on where the energy market goes in the future, Saint points out, "we have great opportunity for load-shedding, and other ways like that of managing escalating energy costs." For example, the CTCC and the hotel complement each other in terms of when the loads occur. The CTCC uses the most electricity during the day, when conventions are taking place, whereas the hotel's peak usage is in the evening. Rather than either one paying higher rates for electricity at peak times, the joint usage will "even things out," allowing both to benefit from more consistent energy prices.

New England Mechanical Services Inc., based in Windsor, has signed a three-year contract to operate the plant.

Byrnes says with the CUP now up and running, SourceOne continues to provide related services to CCEDA. The company created the energy monitoring and billing systems to make sure all of its own customers are charged fairly, and "we take care of the utility billing [from Connecticut Light & Power] and make sure it's accurate," he says.

SourceOne officials say that in reviewing bills associated with the plant's energy costs, the company spotted "an incorrect tariff charge that saved CCEDA around $7,000, and a mislabeled meter charge that saved the authority between $30,000 and $40,000."

SourceOne will also be responsible for negotiating an energy supply contract with the new science center being built directly north of the Marriott.

Galvin says other developers are also taking notice of the effects of energy deregulation on pricing and supply, and are seeking companies like SourceOne to provide energy procurement and management services. Northland Investment Corp., developer of the Hartford 21 mixed-use project and owner of the Goodwin Hotel, among other prominent downtown properties, is one of them.

SourceOne, which manages nearly $350 million of energy infrastructure projects and nearly 600 megawatts of electric power nationally, is also involved in similar discussions with numerous municipalities throughout the state.

Galvin says in addition to hiking prices, deregulation has made the once-simple process of buying power more complex. "Confronting how to buy power efficiently, choosing the right products and choosing the right contract terms are all tasks that have become more onerous for the average commercial and industrial customer, so there's a real steep learning curve for many organizations," he says.

"CCEDA is a perfect example of an organization that was flexible and creative enough to put themselves in the best position."

Sanderson says the agency is very happy with the result. "We think we did a good job in designing a facility that provides us with the maximum level of flexibility going forward," she says.

Byrnes says the CUP "was a great project for everybody. I have to credit CCEDA and the Wolmans [owners of the Marriott] for having the vision and the wherewithal to do this. Unfortunately, most people don't start thinking about this kind of thing until it's too late."