Transcript Tri-State Member Services Conference

Tri-State Member Services
Conference
October 10, 2001
Tricon Overview
U.S. Sites:
KFC
Pizza Hut
Taco Bell
total
•
•
•
•
•
Corporate
1,277
1,805
1,266
4,348
Franchised
4,107
5,420
4,330
13,857
Licensed
1,821
1,908
3,729
Total
5,384
9,046
7,504
21,934
Over 30,000 restaurants internationally (13% share of $160 bil. Mkt)
Headquartered in Louisville, Ky
Tricon Energy Team manages energy for all corporate sites in U.S.
We coordinate energy procurement for franchisees in deregulated
states by aggregating corporate/franchisee loads
We direct demand side programs relative to asset/energy
awareness opportunities to reduce usage and share these
programs w/franchisees
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Energy Tricon Strategy
• Mission: Best in class Energy Costs for Quick
Service Restaurants
– How do we execute? (Two areas)
1) Manage electric and natural gas procurement unit costs
(supply)
» Deregulated states; contract with 3rd Party Suppliers to fix prices
• We bid on aggregated store basis to achieve value (FZ &
Corporate)
• Goal: control energy price volatility (risk management)
» In regulated states exposed to spot tariff prices; work within rate
structure
2) Lead development of programs to reduce energy use
(demand)
» Lead the identification and deployment of energy efficient
equipment
» Create tools, lead execution of energy awareness training
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Brand Energy Use -2001
Average Energy Costs by Brand
(based on 2001 actual bills)
$50,000
$45,000
Total: $44,207
$40,000
Total: $40,027
Gas: $9,781
Electric $34,426
Gas: $7,887
Electric: $32,140
$35,000
Total: $32,369
$30,000
Gas: $6,498
Electric: $25,872
$25,000
Total: $22,828
$20,000
Total: $17,614
Gas: $6,622
Electric: $16,206
$15,000
Gas: $6,141
Electric: $11,472
$10,000
Pizza Hut (Delco)
Pizza Hut (MP)
Taco Bell
KFC
KFC-Multibrand
Overall Energy
Energy = 3.5% of operating costs
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Franchisee/Corp. Total Energy Spend
Tricon Franchisee/Corp. Energy Spend - U.S.
$ Energy Annual (m il.)
$600
$500
$400
$490 mil.
$76
$22
$300
$200
$100
$302
$548 mil.
$526 mil.
$97
$29
$85
$25
$326
$321
$90
$97
$95
2000
2001
2002
$0
Year
Franchisee
gas
Corporate
gas
Franchisee
elect.
Corporate
elect.
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Deregulated Market Strategy
• Natural gas prices - in deregulated states
– If we can beat the utility rate:
» We initially sign contracts with guaranteed % reduction to tariff or;
» Fixed price contracts with terms of 1-2 years or;
» NYMEX index contracts (1-2 years)
• When prices are at historic highs (as they were over last year), we enter into
index contracts that allow spot pricing with trigger rights to fixed prices as
prices come down
• We are now entering fixed price contracts.
» Our performance measure is costs avoidance to tariff
• Electric prices - in deregulated states
» We initially sign contracts with guaranteed % reduction to tariff or;
» Fixed price contracts with terms of 1- 5 years
• Key is to fix prices competitive at historic price levels
» Our performance measure is costs avoidance to tariff
» There are no NYMEX indices equivalents for electric, very regional
pricing dynamics
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Demand Side - Ability to Manage Load
KFC Electricity Use by Equipment Load Curve
other
Exter. Lights
Inter. Lights
Refrigeration
80
Kitchen
70
A/C / Heat
Kwh Usage
60
50
40
30
20
10
12
11
10
9
8
7
6
5
4
3
2
1PM
12
11
10
9
8
7
6
5
4
3
2
1AM
0
Hour
• Largest usage is kitchen and AC during summer
• No one area w/large usage where we can cut; must have small cuts
in multiple areas, must serve customer
• Focusing on Tstat control, lighting, kitchen equip. staging
• Little opportunity for real time pricing, load shifting
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Demand Side Programs
•
•
Equipment oriented
– Lighting; T12 to T8 retrofits
– Energy Management System for HVAC, lighting control
– Energy efficiency for kitchen equipment
– Designing greater energy efficiency into the 400 new stores we
build each year
Energy awareness
– Changing behavior relative to energy use
» Very difficult in our industry, 300% turnover makes it hard
to train
» Simple tools including posters, notes in bulletins etc.
» Estimate up to 10% usage reduction available ($50 mil)
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Expectations of Utilities
What are our challenges?
Tricon Service by Utilities
Tricon Corporate Sites - U.S.
4,300 sites
Muni/public
20%
Tricon
•Mostly urban IOU’s
Cooperative
4%
•Primary focus on dereg/
controlling price volatility
•Extensive staff resources
for DSM/ energy audits, etc.
IOU
76%
Franchisees
•Mostly suburban & rural, high #
public/cooperatives
Franchisee Sites - U.S.
17,500 sites
Cooperative
20%
•Primary focus on
reducing/controlling energy use
•Low staff resources, relies on
energy support from regional
vendors, welcomes utility
support (audits, financing, Econ.
Development)
IOU
46%
Muni/public
34%
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Franchisee (FZ) Needs
1) Energy Audits
•
Chart reflects Taco Bell
use, little opportunity to
help in kitchen, but
significant opportunity for:
– lighting (T12’s)
– HVAC/water
– Refrigeration
– financing options
Taco Bell Electric Use 2001
Lighting 18%
Other 9%
Kitchen 34%
HVAC 25%
Refrigeration 14%
2) Summary Billing
•
Especially when load
averaging allowed (next
pg.)
3) Billing Services
•
Many FZ going to
outsourced services
4) Monitoring Services
• Many FZ are also using 3rd party monitoring
services for Energy Mgmt. Systems (EMS)
5) Performance Contracting
• Cooperatives would appear to have financing
advantage offering asset financing to FZ
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Summary Billing/Load Sharing - JEA
•
Jacksonville Electric Authority in Florida
– Offered coincidental peak load reduction program
– Began in 1998; continues through 2002
» Allowed us to combine all of our corporate Pizza Huts into one load
» System picks overall combined peak load as the total kw for a month
instead of individual site peak kw
» Has allowed for approximately a 10% reduction in peak kw on a site by
site basis
» Have realized over a $1,000 PRA reduction in annual costs (9%)
» We pay only metering fees and a special facilities charge to participate
in the program
» One bill a month that covers all 20 locations
•
We would have even lower costs if we had other brands in the area,
higher load diversity
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What Would Tricon Like from Cooperative Utilities
•
•
•
•
•
•
•
No shut off policies for Tricon and Franchisee locations
– handling billing issues before they result in shutoff; more of a
natural gas than electric issue
Single point of contact for all issues
– Customer advocate
Rate analysis as tariffs change
Participation in deregulation programs
Accurate and timely billing
– Eventual EDI capabilities
Demand side opportunities
Website development
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What is Cooperative View of Deregulation?
• Will you participate?
– We view cooperatives as very competitive suppliers in most areas
» Especially in KY, IN, OH
– Not necessarily concerned whether an area is deregulated or not
» We want deregulation when retail rates do not reflect wholesale costs
plus reasonable delivery charges
• California, NY, Upper Midwest are areas with this issue
– We’re curious why more cooperatives are not involved as
nonregulated marketers on a regional basis
» You have extensive knowledge, G&T generation assets
» We bid all markets on regional basis on dereg. side
» We thought we would see more Cooperative gas marketers in
deregulated gas markets (Ohio)
– Will Touchstone organize more national services directed through
area distribution cooperatives?
» Demand side services
» Financing
» Dereg. marketing
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