Jill Zagman, a recycling aide, sorts printer cartridge boxes Wednesday morning at the MSU Recycling Center. The current center must send most sorted goods to other plants for further processing, but workers will be able to do more on site when the new plant opens. “It’s a great opportunity for the community,” said warehouse manager John Stepancevich (not pictured). “It’s an investment in the future.”
Editor’s note: This story is the second in a three-part series on MSU’s budget pressures. For the third and final installment, read about how the budget squeeze is impacting academic programs in the Friday edition of The State News.
Although it represents only about 6 percent of MSU’s $1.1 billion budget, energy and utility consumption is one area university officials are targeting to cut costs for next year in the face of decreased state support, possible layoffs and an increase in tuition.
This year, energy and utility consumption cost the university about $64.4 million, up about 14 percent, or $8.1 million, from 2007-08.
“As we look at the balance of increased tuition against university reductions, all general fund resources are looked at,” said Kathy Lindahl, MSU’s assistant vice president for finance and operations.
“The focus in the energy area is on making reductions in terms of energy use.”
Fuel prices
MSU’s Simon Power Plant creates energy predominantly from coal, although it diversifies by burning some natural gas.
In addition, MSU buys some electricity to power certain areas, such as the south campus farms that don’t receive power from the plant.
Because the majority of the energy budget comes from fuel purchases, the amount the university spends each year on energy depends heavily on national and international fuel prices.
The 14 percent increase from 2007-08 to the current year came after fuel prices increased dramatically during summer 2008, said Bob Ellerhorst, director of utility services at Simon Power Plant.
“That was a very unusual circumstance,” Ellerhorst said.
“The whole thing with the rising energy costs hit us last summer, and was fully implemented over this year.”
The university buys fuel through varied-length contracts that help stabilize MSU’s budget in a fuel market that is often unstable. Because MSU signed contracts for the first half of the 2008-09 fiscal year before the fuel cost increase during the summer, it was protected.
However, when those contracts expired in January, the university was exposed to the inflated prices, thus increasing the total budget.
Ellerhorst said the university will continue to feel the effects of the fuel cost inflation into the first half of the next fiscal year, which begins July 1.
Because a number of the university’s fuel contracts expire in December, new negotiations will begin in August or September, Ellerhorst said.
Although the 2009-10 budget isn’t finalized, Ellerhorst said he hopes to sign cost-efficient contracts by the end of this year and take advantage of sliding fuel prices occurring now.
“When those get renewed, my expectation is that they’re going to reflect current market,” he said.
“If the current market is lower then, we’ll be able to do that. We’re totally speculating because we’re not working on those contracts until end of the third quarter.”
Consumption changes
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Although costs have increased this year, actual fuel consumption has decreased since 2007-08 by about 3 percent through the end of March.
Ellerhorst said there are several reasons why the reduction has occurred.
First, the summer of 2008 was relatively cool, which drove down campus air conditioning costs.
He also said increased awareness on campus to save energy may have played a role in the decrease of consumption.
David Byelich, director of the Office of Planning and Budgets and an assistant MSU vice president, said the university has begun to monitor heating, ventilation and air conditioning systems more closely in campus buildings.
He said turning off these systems when classrooms and offices aren’t being used can have a substantial impact on energy costs.
In Baker Hall this year, for example, energy systems were monitored and turned off during times of inactivity.
Byelich said energy consumption in the building has decreased by 20 percent.
Although Baker Hall is predominantly an office building, and other buildings with laboratories and classrooms that need to be open late would have different energy consumption patterns, Byelich said he is encouraged by the results.
More work to do
Lindahl said all buildings on campus will have “smart-metering” devices within the next three years.
These devices will be able to monitor energy usage in real-time, allowing university officials to make changes to inefficient systems and facilities.
The plan is expected to reduce every use by 9 percent per building.
The university also will finish construction this fall on its new Surplus Store and Recycling Center, which will allow MSU to recycle more material — and generate a profit.
By shipping recyclable materials to areas where they can be used, the facility will be able to pay itself off and be self-sustaining.
“Currently, we’re captive to the other recycling facilities and what they elect to decide based on their economics,” Ellerhorst said.
With the new facility, “we can establish our own economics.”
MSU President Lou Anna K. Simon said energy and utilities are an important target for cost cuts, even as the university currently spends less than any other school in the Big Ten for energy costs per-square-foot of campus area.
“If you’re really high, it’s easier to make a percentage reduction than when you’re already really low,” she said.
“I’m not optimistic at this point that we can see a big swing in (energy costs), but that’s something between now and when the budget is finalized that we’re going to look at pretty carefully.”
Simon said students will notice more buildings could be closed during areas of inactivity, and some classes will be consolidated to common locations, which might mean longer walks to class for some students.
Ellerhorst said although energy costs don’t comprise a large part of MSU’s total budget, it remains an important part of the budget picture for next year and into the future because of the extent to which it’s increased in recent years.
“What’s upsetting is that wasn’t too long ago that it was a $40 million or $45 million operation,” he said.
“Try and come up with $15 million — that’s a really significant number.”
