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UNM Hires Energy Adviser

By Martin Salazar
Journal Staff Writer
       The University of New Mexico is spending $1.9 million a year for energy conservation advice from a Dallas consulting company selected without a competitive process.
    The four-year contract was awarded in August 2007 through Lobo Energy Inc., an arm of UNM not required to adhere to state procurement laws.
    The company hired recently was the subject of a Massachusetts inspector general report advising caution when entering into contracts with Energy Education Inc. and similar companies.
    The advisory, issued in January, specifically said it was not an evaluation of Energy Education's services, but raised questions about the value Massachusetts school districts receive from such contracts and about how cost savings are calculated. The inspector general said many of Energy Education's "proprietary measures" are simply "common sense" ideas.
    Energy Education spokesman Mike Gullatt defended his company's program, saying, "They're much more than common sense measures."
    "There's over 1,200 points that we look at on a campus as far as energy savings," he said. "So it's much more than turning out the lights ... We go in and do a detailed analysis of a campus."
    The company has estimated that UNM can save more than $57 million over the next 10 years if it follows a conservation plan it prescribes.
    The company guarantees that if the university spends more on the conservation program than it avoids in cost, the company will refund the difference.
    So far, UNM officials claim they are saving about $150,000 a month — or $1.8 million annually.
    The cost avoidance is calculated through a software system mandated by the company, and the inspector general report notes "there is an inherent potential for error in cost avoidance calculations that should be made clear to prospective clients."
    Lobo Energy, the UNM group, began paying the company its monthly fee of $160,400 in October. Lobo Energy also paid $40,000 for the software and has budgeted another $500,000 for the current year for extra staff the contract requires.
    Those required employees, called energy educators, each make about $60,000 a year, said Steve Beffort, UNM's vice president for support services and the president of Lobo Energy. He would not say who was filling those positions, saying Lobo Energy operates like a private company and isn't required to do so.
    He said he didn't know whether he could reveal what qualifications they were required to have because that might be proprietary information.
    The money for the program is coming from UNM and includes state appropriations.
    Lobo Energy's board of directors approved the contract, and UNM regents also signed off.
    UNM President David Schmidly, who sits on the Lobo Energy Inc. board, abstained on the vote, partly because he introduced the company to UNM, university spokeswoman Susan McKinsey said.
    Schmidly connection
    Schmidly's connection to Energy Education goes back to his Oklahoma State University presidency when the company was hired to provide energy savings advice there. During his tenure, OSU's business school was named after the company's founder, William Spears, who had made a large donation. Spears is an OSU alum.
    OSU officials are pleased with the work Energy Education Inc. has done for the university. In a September news release, the university announced it had saved more than $2.2 million across its five campuses through the first seven months of 2008.
    Beffort said UNM is realizing about $150,000 a month in cost avoidance.
    "We say avoided cost versus savings because actually with the utility rate increases and the additional space, we're still spending more money than last year," he said. "But when you look at individual buildings, we're actually spending less by building."
    Beffort said he's confident in the avoided cost numbers because UNM has an engineer checking the calculations.
    Beffort said the university didn't go through a competitive process in hiring the company because it felt it needed to move quickly, given a PNM rate increase.
    If Lobo Energy were to terminate the contract early, it would pay a base penalty of between $1.5 million and $2.4 million.

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