Who Pays the Electricity?

Introducing more energy efficient machines often requires an additional upfront investment for a vending operator. Some operators have found that this investment is worth making because the savings to the location improve the operator/client relationship.

In many cases, operators have found that offering energy efficient machines helps win business from energy conscious accounts. Environmental awareness is rising among clients.

In some situations, utility companies subsidize the installation of energy saving devices. Automatic Merchandiser has reported numerous instances where utilities and utility consortiums subsidize installation of USA Technologies’ EnergyMiser.

The reason an operator may not be overly encouraged to investigate energy efficiency is that the host location typically pays for the electricity consumed by the equipment. The operator does not pay for the electricity and therefore typically does not have an incentive to seek the most energy efficient equipment.

In cases where the location receives a commission, however, the client may be willing to accept a lower
commission if energy costs are reduced due to
lower usage.

Despite the fact it may be costly or risky to attempt to renegotiate a site contract, the incentive to purchase more energy efficient machines may be facilitated through such negotiations. It is for this reason there is a growing market for energy-efficient machines as environmentally-conscious vending companies push to install more such machines. Additionally, a vending operator may become interested in sharing some or all of the energy costs, depending on his contract percentage share with the site client.

Should there be a provision in a vending contract that delineates responsibility for energy costs? Should there be a split incentive for machine owners and site clients to strive for energy efficiency?

CONTRACTS CAN DESIGNATE ENERGY RESPONSIBILITY

How the benefits and burdens are shared between the equipment purchaser and the site management is a function of the contract, and this allocation may in fact change as the expenses of either party change as a result of subsequent events, such as changes in electricity prices or standards requiring more efficient machines.

Unfortunately, the language contained in vending contracts tends to vary widely.

In most vending machines, energy consumption depends on internal temperature and lighting factors as well as ambient temperature, which contribute to the overall heat load of the equipment. It is interesting to note that most practitioners believe that since a beverage vending machine has a closed refrigeration system, its operation will not be significantly influenced or impacted by ambient temperature. This simply is not the case.

Generally, where commissions are involved, the operator agreement with the site client may stipulate that a portion of the commission is intended to reimburse the client for space and power. As a consequence, the vending industry may include a facility rental income (FRI) clause that clarifies the payment revenue stream is intended to cover expense liability.

THE FACILITY RENTAL INCOME CLAUSE

In the past several years, some site clients have begun preparing a location request for proposal for a vending contract that challenges potential vendors to provide an energy-efficient vending machine. Compared to a traditional vending machine, an energy conserving model is not only more environmentally friendly, but typically does so without an appreciable difference in capital cost.

The goal is to combine business and environmental concerns into a mutually beneficial agreement. As a result, some clients are building vending contracts with specific language that delineates the responsibilities of each party.

Sample language is as follows: “The vending operator must provide vending machines that earn the Energy Star designation and meet the Energy Star specifications for energy efficiency. The site client and vending operator are encouraged to visit www.energystar.gov for complete product specifications and updated lists of qualifying products.”

AN OPPORTUNITY TO PARTNER ON ENERGY SAVINGS

Most sites have a contract spanning several years with a vending operator who is responsible for providing beverages, snacks, meals, and other services. While the vending operator owns the vending machines but the site client typically pays for energy usage, there is an opportunity to work together to get energy efficient machines that may cost more to purchase yet will cost less to operate. Requiring Energy Star certified machines in a request for proposal is a good first step.

The Department of Energy sample procurement language is designed to help ensure the vending operator installs machines of a higher level of efficiency and/or upgrades existing machines to equivalent Energy Star standards. By doing so, the operator and client site both benefit.

By choosing a vending machine that has earned the Energy Star logo, operators will be helping promote eco-friendly practices without sacrificing product quality and/or machine performance.