HANNAFORD'S ENERGY PACT STREAMLINING USAGE, COSTS

LINDA PURPURA

SCARBOROUGH, Maine -- Hannaford Bros. here recently signed a seven-year contract, totaling more than $300 million, with an energy asset management company to cut costs and streamline usage.

Under the new contract, Evantage, Glen Allen, Va., a division of Virginia Power, a subsidiary of Dominion Resources, Richmond, Va., is providing Hannaford's 142 grocery stores with natural gas, propane and electricity at a guaranteed price. Bills for these services now go directly to Evantage, eliminating additional costs for Hannaford.

The energy asset management company is also taking over self-generation units, which replace supplied utility power, that are installed in a number of Hannaford stores.

In addition, Evantage is taking responsibility for daily monitoring of the building automation systems in Hannaford's distribution, retail and office facilities, to make sure each is operating as efficiently as possible.

Energy conservation opportunities in its stores, many of which were already under way in lighting, refrigeration, heating and cooling, are also being handled by Evantage and are "on their nickel," said Tom Matthews, director of energy services at Hannaford.

"We want to reduce the burden of energy purchasing and management activities on our own resources," Matthews said. "We wanted the savings that they are providing us."

Matthews believes Hannaford's move to total energy asset management could be the beginning of a "pattern" for the industry.

"We are rebundling what the deregulation of the electric and gas industry has recently unbundled," Matthews said. "We take no risk in any lack of success on their part on energy projects or rate negotiations. Our rates are already 15% lower than the rest of the supermarket industry because of rate deals we have in place."

He added that Hannaford expects multimillion dollar savings over the course of the contract with Evantage.

Matthews believes deregulation won't save any one very much in the near term due to utility companies' stranded investments and other constraints.

Stranded investment refers to the uneconomic portion of a utility's costs. For example, backup facilities to serve customers in peak demand times are not in use all the time, and thus represent stranded investment.