Power play: Metering tools slash energy costs

Don Howell, CEO of ADMMicro

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(Fortune Small Business) -- The minute a lightbulb burns out in your place of business, Don Howell can tell you about it. By e-mail, that is - the tall Virginian won't show up at your office door. His company, ADMMicro, installs power metering equipment that can tell when an air conditioning filter needs to be changed or whether a freezer door has been left open.

"We know at any moment exactly how energy is being used," Howell says in a thick Blue Ridge drawl.

Over the past seven years, the Lynchburg, Va.-based ADM, with just 50 employees, has become an unlikely major player in the so-called submetering industry, competing with the likes of Honeywell (HON, Fortune 500) and General Electric (GE, Fortune 500). CEO Howell, 59, and his partners Arnie Tamagni, Mark Vinson and Mike Campbell have been able to pull this off because all four are veteran electrical engineers. In 2002 they took severance deals from the local power utility and started playing around with circuit boards and software. Their goal was to track power flow to individual gizmos in small buildings. Two years later the men had six patents pending. (Two have since been granted, including one approved in February for a control panel.)

At one time only large commercial facilities could afford such sophisticated technology. But Howell is making submetering pay in even the smallest buildings. ADM installs submeters wherever the client can save money by cutting power consumption. Popular sites include HVAC units and lighting systems. Clients can view online power reports that are updated from every 10 seconds to once a day, depending on their preference.

Five years ago the company posted $2 million in sales. Today Howell will say only that ADM is "still below $50 million," but he projects revenues will exceed $100 million by 2012. For now the company is targeting national companies with 100 or more sites. The client list includes franchised restaurant chains such as Hardee's and Wendy's (WEN).

ADM's technology monitors and controls energy use on the same circuit, keeping costs low. This has helped it penetrate a field previously dominated by big players (and big customers). Installing a submetering circuit board can cost thousands of dollars for each circuit monitored. Until power rates started rising, it wasn't worth installing one for each HVAC unit in a fast-food restaurant.

"The size of the user has gotten smaller and smaller as energy costs have gone up and monitoring-technology costs have gone down," says Lindsay Audin, an energy consultant who teaches courses on submetering through the Association of Energy Engineers.

Take Mike Hancock, executive vice president at Boddie-Noell Enterprises, a restaurant company based in Rocky Mount, N.C. Two years ago Hancock had ADM systems installed in 250 of the company's Hardee's fast-food restaurants. He chose ADM over Honeywell when the latter said it wouldn't support the equipment after seven years.

The total cost of installation was $10,000, plus a monitoring fee of $25 per month per building. Boddie-Noell is already saving money by measuring how much energy its cookers and fryers use and by figuring out the optimal time to turn them on and off. "Our investment will pay off in 2½ years max," Hancock says.

If a piece of equipment exceeds the energy usage parameters that Hancock has set - an AC unit is drawing more power than it should at a given time of day, say - he gets an e-mail alert. He can then tell a store manager to see whether the filter is clogged or a belt has to be changed. If someone is needed to make repairs, he or she can be told which parts to bring.

ADM keeps installation costs low enough that companies as small as Wendium, a restaurant group in Miami with $16 million in revenues, are earning instant returns. Raul Dominguez, CEO of Wendium, had ADM equipment installed to monitor the lighting, walk-in freezer and refrigerator, and three HVAC units at six of his fast-food franchises.

In South Florida, air conditioning makes up a huge part of the electric bill. That cost is compounded in restaurants, where workers standing over fryers tend to goose the AC for the whole building. "Customers need a jacket because the dining room is so cold," Dominguez says.

To keep his workers from changing the thermostat, Dominguez called in ADM in late 2007. He is paying for the submetering equipment in installments of $275 a month and will own the equipment after 36 months. He says he is saving $500 monthly on energy costs. "I'm financing it as I go," he says. "There's no money out of my pocket yet."

Within a few weeks of installing the system, Dominguez noticed that energy usage in a walk-in cooler spiked at night. He suspected that delivery people were propping the cooler's door open for the hour that they loaded it with food. When he called the delivery company, Dominguez was asked how he could possibly know that. He later showed them a graph of the cooler's temperature between 3 a.m. and 4 a.m. The delivery workers stopped propping open the door.

Dominguez was thrilled with the results: an immediate 17% decline in kilowatt-hours. "It's like having an energy spy onsite," Dominguez says. ADM even controls Wendium's lighting. The signage and dining room lights turn off when the store closes, but the kitchen lights stay on an extra hour while the workers clean up.

ADM's solution doesn't work for every business. The installation cost may not justify monitoring circuit breakers that don't carry high power loads. "It depends on how much kilowattage is passing through the building," says Audin, the energy consultant. "A 3,000-square-foot office doesn't use a lot of juice. But a 3,000-square-foot Kinko's holds a lot of machines. Saving 1% is going to make a difference there."

Turnkey submetering services, like ADM's, are hard to find. Typically one company supplies the hardware, another the software and another the service. Sorting through which offers what can be confusing. And the industry is growing rapidly, fueled by numerous acquisitions. It's not unusual for clients to sign up with one company and quickly find themselves working with another.

Because ADM handles its own manufacturing and power monitoring, Howell believes that the company will come to dominate the small-client niche. And a promising development on the horizon is overseas sales. Howell recently signed a contract with Eason and Son, a large chain of bookstores in Ireland. He jokes that his Irish clients might not be able to understand his heavy Blue Ridge accent. But if he points to the savings on their power bills, they'll understand him just fine.