Dealing With Rising Energy Costs

(from Maine Townsman, October 2005)
By Mike Laberge, Freelance Writer

When he put together Fort Fairfield’s budget last winter, Town Manager Dan Foster figured that $1.50 per gallon would be a safe bet for the cost of fuel.

Then prices surged past $2 a gallon and Hurricane Katrina hit, threatening to push the Aroostook County town as much as $15,000 over budget. The town now is looking to save fuel by, among other things, curbing the number of plow runs during snowstorms and restricting police patrols to 50 miles per shift.

“We need to be looking at doing things differently, because these high prices are not going away,” Foster said.

From York to Van Buren, municipalities are feeling the pinch of energy costs that in some cases have jumped by more than 50 percent in the past year. In many places, the increases are likely to break the budgets for gasoline, diesel and heating oil, forcing communities to adopt conservation measures and consider spending cuts.

Some communities have initiated no-idling policies and turned down thermostats in municipal buildings. Others have taken more drastic steps such as curbing police patrols and curtailing hours at municipal buildings, including libraries.

A recent MMA survey found that energy costs hit public works and public safety especially hard. Eighty-four of the 89 municipalities that responded expect energy prices to bite into their operating budgets before the end of the current fiscal year.

Nearly two-thirds of the town and city managers who answered the survey said they worry that energy costs will force them to overdraft budget accounts. The remaining third said they should be able to absorb the costs, largely because of locked-in fuel prices and previously negotiated service contracts.

Energy costs also threaten to compound the effects of LD 1, the tax-relief measure passed in early 2005 that places a spending limitation system on Maine municipalities.

Here is a snapshot of the steps Maine municipalities are taking to combat fuel costs:

• Biddeford’s public works department is encouraging workers to use as few pieces of equipment as possible on projects and to car-pool to job sites.

• Several communities, from Eastport to Presque Isle, have reduced police patrols. Most say officers will respond to rural areas only if called there.

• Livermore will close its community center a month earlier than normal this winter, forcing community groups to find other facilities.

• Mechanic Falls is experimenting with a fuel additive that promises to increase gas mileage by as much as 2.4 miles per gallon.

• New Gloucester and Norridgewock have reduced library hours.

• Vassalboro is enforcing a ban on cardboard in municipal solid waste to reduce the volume of trash and curb the number of trips to the Hatch Hill Landfill in nearby Augusta.

• Woodland is ordering parts and supplies as much as possible from stores that deliver.

• Greenwood is considering steps that include lowering the ceilings in municipal buildings, buying thermostat timers, and purchasing solar panels.

FUEL PRICES SURGE

Matt McKenzie, director of public affairs for AAA Northern New England, said the average retail price of gasoline jumped from $1.98 in September 2004 to $3.21 one year later. That is an increase of 62 percent.

Retail prices for diesel fuel surged by 40 percent during that same time, climbing from a statewide average of $2.12 in September 2004 to $2.97 one year later. (Although many municipalities purchase fuel for less than the retail price, these figures provide a snapshot of how high fuel prices have climbed in such a short time.)

McKenzie said prices are expected to remain high, driven largely by growing demand in Asia and insufficient refining capacity in the United States, where the newest oil refineries went online nearly 30 years ago. “You’re seeing huge demand for oil in China and India,” McKenzie said.

Municipalities looking to cut energy costs might want to follow the lead of state government. Beth Nagusky, director of the state Office of Energy Independence and Security, said the state in recent years has taken conservation measures that have put it ahead of the curve.

Gov. John Baldacci has issued executive orders mandating energy conservation. The state added hydrids and other fuel-efficient vehicles to its fleet, encouraged employees to reduce vehicle miles traveled, and installed energy-efficient lighting in public buildings. Such measures have served to reduce the state’s fuel consumption from transportation alone by 4 percent over the past two years, saving roughly 550,000 gallons.

“We’ve had a huge head start on this,” Nagusky said. “We’re reaping the benefits now.”

The current energy crunch harkens back to the energy crisis of the late 1970s and early 1980s, when high prices forced consumers to consider conservation measures. People bought smaller cars and made their homes more energy efficient. But the popularity of such measures faded as soon as fuel prices dropped. Vehicle sizes grew, and gas mileage dropped.

“The problem with energy is people focus really heavily on it when it’s expensive, and very little when it’s cheap,” Nagusky said. “Somebody once said we go from panic to complacency.”

She hopes municipal leaders begin taking steps now to increase conservation over the long term. She said she would welcome the chance to start a dialogue with Maine communities.

“I’d love to talk to them and tell them what the state has done,” Nagusky said.

COMMUNITIES STRUGGLE

Many communities have responded to the current price spike by reviewing their operations and cutting back on fuel use where they can.

Bangor uses a total of about 1.2 million gallons of fuel each year to heat its buildings and run its vehicles. A sustained price increase of as little as 25 cents per gallon could cost the city an additional $300,000 annually.

During budget deliberations, Bangor estimated the cost of diesel fuel and No. 2 heating oil at $1.75 per gallon. Fuel prices that now exceed $2 per gallon are likely to have a major impact on the city budget, according to David Pellegrino, the city’s purchasing agent.

“It means cutting back in other areas,” he said, adding that prices for paving and road salt also have jumped. “We’ll be looking for other savings within the budget.”

Bangor has adopted a no-idling policy for most municipal vehicles and a requirement that police officers double-up during the overlap between the day and evening shifts. A committee is reviewing operations and considering other savings, including the possibility of burning waste wood to heat part of the public works garage.

But conservation measures can only go so far. “We still need a certain sized dump truck to plow the roads,” Pellegrino said.

In Lewiston, municipal officials hope to avoid extraordinary measures. So far, the city has taken routine steps that include limiting idling times, adhering to posted speed limits, and maintaining vehicle tire pressures. The city also may use a fuel additive that promises to increase engine efficiency and improve gas mileage.

But if prices remain high, Lewiston officials are prepared to consider steps that include hiring freezes, limits on purchases, and across-the-board budget cuts.

With prices exceeding $2 per gallon, energy costs could exceed their budget estimates by as much as $500,000.

“We’re going to take all the least painful measures first,” said Assistant City Administrator Phil Nadeau.

“We’ll all do what we need to do to get to zero at the end of the year,” he said. “The only question is, ‘How painful is that going to be in the final analysis?’ The jury is still out.”

Portland also is taking a hit, with fuel prices now double what the city had budgeted. In a city that uses a combined 400,000 gallons of gas and diesel annually, price jumps of as much as 70 cents a gallon over budget could mean an additional $280,000 in fuel costs to run the city’s 800 pieces of motorized equipment.

Portland administrators have asked employees to turn off their engines when parked. They also are looking for other ways to cut costs and conserve fuel.

“If you idle any more than 30 seconds, you’re wasting fuel,” said Peter DeWitt, the city’s communications director. “You can’t always control price, so we’re trying to control consumption.”

He conceded that innovation can only go so far. “The difficult thing is there’s no such thing as a hybrid plow truck or a hybrid fire engine,” he said.

Kevin Mallory, transportation director for Portland’s school district, said he’s bracing for another tough year. In fiscal year 2005, fuel prices pushed his costs $24,000 over budget. This year, he’s projecting a $52,000 overrun.

Mallory and other school officials are doing what they can to reduce consumption. Three years ago, Portland became the first school district in Maine to introduce a no-idling policy for school buses, driven largely by concerns about student health.

Mallory also continually tweaks the city’s computerized bus routes. In 1996, his first year as transportation director, buses traveled a total of 390,000 miles. Last year, they ran a total of only 340,000 miles – a drop of 50,000 miles.

That reduction curbed fuel use by 7,692 gallons, saving the city about $16,000. With school buses attaining just six to seven miles per gallon, such a savings can be significant.

“As you do things with these routes, you can see the miles drop off,” he said.

ALTERNATIVES CONSIDERED

With energy costs expected to remain high, some communities are exploring alternative ways to reduce expenses.

At least two communities – Falmouth and Bangor – are fueling their public works vehicles with biodiesel, a cleaner-burning blend of new and used organic oils, including soybean oil.

Falmouth received its first shipment of biodiesel last April from Frontier Energy, a distributor based in the town of China. The town plans to use the fuel in its plow trucks, school buses and other diesel-powered vehicles.

Dana Fischer, a Falmouth budget analyst, said biodiesel initially cost more than regular diesel. The prices of the two, however, have fallen into line with the recent oil price spikes. Falmouth in August bought biodiesel at $2.16 per gallon, which was cheaper than regular diesel on the day the town took delivery.

After researching the issue, Falmouth switched to biodiesel for several reasons, according to Fischer: It pollutes less than regular diesel, helps reduce dependency on foreign oil, and can reduce wear-and-tear because engines run cleaner.

Town officials hope the switch to biodiesel ultimately will lower their maintenance costs and lengthen the useful lives of municipal vehicles, saving money over the long term.

“It was definitely an environmental choice,” Fischer said. “We figured that by running it in the school buses, the kids would be breathing less polluted air.”

Portland has taken a similar route. The city’s school district earlier this year won a $100,000 grant from the U.S. Department of Energy to help purchase three school buses that run on compressed natural gas (CNG). The grant covered the gap between the price of a bus that runs on regular diesel and one that uses CNG.

Mallory, the transportation director for Portland schools, said he expects the first three CNG buses to be in service by January.

Besides reducing soot pollution from diesel engines, CNG carries economic advantages, according to Mallory. For one thing, the price remains stable at $2.10 per gallon. For another, CNG is a more efficient fuel, meaning that it takes less to power a bus, boosting the miles-per-gallon rating. Finally, the cleaner burning fuel results in less wear-and-tear on engines.

Eventually, Mallory hopes to replace Portland’s entire fleet of 30 school buses with CNG models.

The move continues a trend in Portland toward cleaner-burning municipal vehicles. In the fall of 2004, the city received a $30,000 grant from the U.S. Environmental Protection Agency to retrofit older school buses to reduce soot and other harmful emissions.

“There’s a lot of money out there for this, if you know where to find it,” Mallory said.

In coastal Camden, wind is the word. The school board for the five-community school district that covers Camden, Rockport, Appleton, Hope and Lincolnville recently approved a pilot project that eventually could lead to construction of a wind turbine outside Camden Hills Regional High School.

Keith Rose, facilities director for the Five Town Community School District, said project supporters are seeking a variance from the town of Camden to erect a 40-meter tower to collect wind data for the region over the next year. The University of Massachusetts would pay to put up the measuring device to determine if wind power is viable in the coastal region.

“There’s always been pretty strong environmental leadership among students at the high school,” Rose said.

If all goes well, supporters hope to raise enough money from grants and other sources to erect a wind turbine outside the high school in 2007, at a cost of more than $100,000. Rose said the 100-kilowatt turbine could generate enough electricity to power the school, ultimately saving electricity costs that now average $175,000 a year.

“The goal is to erect a wind generator on school property,” Rose said. “We can directly offset any power we use by plugging that right into the grid.”

Other communities are likely to take a wait-and-see attitude before investing in new technologies. They prefer to delay major policy decisions until they see what happens to fuel prices in the months ahead.

“We’re not taking this lightly,” said Nadeau, the assistant Lewiston administrator. “There’s no question, there are going to be some interesting decisions being made by local governments, in terms of how they make their purchases.”