Bulk buying affects KSU energy prices

Kevin Kolus

The powerplant uses natural gas turbine compressors to reduce the environmental impacts of electricity. KATIE ROUPE | DAILY KENT STATER

Credit: John Proppe

While homeowners can benefit from the recent drops in natural gas prices, Kent State cannot.

That does not mean energy costs are in the red; the university just doesn’t purchase natural gas the way most households do.

Tom Dunn, associate director of campus environment and operations, said the university purchases its natural gas through “hedging,” where prices are locked in before the month of consumption. Buying in advance allows the university to obtain great quantities of natural gas for storage when the price is cheaper.

The strategy in purchasing natural gas, Dunn said, is in buying only a portion of the campus’ possible storage capacity. This way, if prices do fall dramatically, cheaper gas can still be purchased. However, storage on campus is currently at record maximum.

“In our business, flexibility is the key,” Dunn said.

The university gets its natural gas from one source, separating Kent State from the average homeowner who receives prices from individual suppliers.

“We buy gas from a ‘hub,’ the Henry Hub, down in Texas,” he said. “Gas is priced as if all the gas in the United States went to the hub.”

When natural gas is purchased from the Henry Hub, other expenses such as transportation, excise tax and “shrinkage,” or the difference between how much gas was put into the system and how much was actually sold, add significantly to the total cost, Dunn said. For instance, $1 of gas from the Henry Hub could eventually become $2.40 by the time it reaches campus.

“Last year it hit your pocket books,” he said. “It’s really been hitting ours. Ten cents (in price fluctuation) to us is $80,000.”

Michael McDonald, director of campus environment and operations, said in one hour the power plant burns the natural gas that an average household would in a year.

The power plant uses natural gas to power its two gas-fired turbines, which provide 80 percent of the university’s power, and produce 60,000 pounds of steam per hour. The steam is piped across campus and supplies the heating and cooling for buildings, saving the university money by offsetting other energy costs.

Dunn said steam is the “lifeblood” of campus. The first turbine that was installed, which he estimated cost $2.1 million, paid for itself in 18 months based on the amount of money its steam production saved.

Efficiency is not the only reason Kent State installed these turbines, Dunn said. They are incredibly clean, much more than the old coal-burning facility.

Total emissions for the power plant are at 79 tons of pollutants per year, Dunn said. The old facility produced 1,000 tons of pollutants per year.

Other utility alternatives at the Power Plant include running on pure electricity or oil. Around 180,000 gallons of oil are stored underground at the plant, Dunn said. However, this reserved oil could only power the university for a week and is saved for an emergency.

“Oil isn’t very economical,” he said. “But in an emergency, economics is not an option.”

Thomas Euclide, director of Office of the University Architect, said natural gas prices affect construction material prices. Bricks, concrete and steel are all forged with processes involving natural gas.

Euclide said purchasing decisions for construction materials are not based on natural gas but on the overall condition of the market. The Office of the University Architect also places bids in advance during seasons when supplies will be cheapest. Euclide said the university consults specialists who watch every aspect of the market to help influence cost-effective decisions.

Contact building and grounds reporter Kevin Kolus at [email protected].