Soaring energy prices translate into higher operating costs and big-dollar budget problems for UC Davis.

The unanticipated hikes in gasoline and natural gas prices over the past year have forced departments to siphon from budget reserves in order to keep the campus running.

"The market has so much volatility to it that we don’t really know what we’ll be paying," says Charles Kennedy, assistant director of Facilities Services.

Facilities Services purchases natural gas on a monthly basis at a locked in rate. At this time last year, the department paid 28 cents a therm for the natural gas needed to run the central heating and cooling plant on campus. This month, the rate was locked in at $1.47 per therm. But just during the past couple of weeks, Kennedy says, the rate has risen to about $3.40 a therm in Northern California.

"The market is well above any forecasted price," Kennedy says. Facilities Services prepared a budget last June anticipating it would cost $360,000 for natural gas this month. Because of the recent jump in prices, Kennedy says, "We’re going to have a deficit of a million dollars for the month of December."

Keith Roberts, an energy conservation engineer in the facilities department1, says in the seven years he has worked on campus he has never seen the natural gas market as volatile as it is now. "We do have a $2 million reserve account for times like this," Roberts says, "but it has already been exhausted."

Unitrans is also feeling the pinch from the rise in natural gas prices. Although its rates are lower than Facilities Services’ rates because Unitrans compresses its own gas, recent price hikes have had a significant impact. Like Facilities Services, Unitrans budgets for fuel based on the previous year’s rates and projected costs with some room for contingencies.

Last year, Unitrans spent $140,000 on fuel, about 70 percent of which was for natural gas. Now, says Anthony Palmere, Unitrans assistant manager, "The price for fuel to run Unitrans will increase on the order of $75,000 to $100,000 annually at the present rate."

Jim McElroy, general manager of Unitrans, says he planned for a $25,000 increase in fuel costs over last year. He says he anticipated some rise in natural gas prices, but was not expecting what will probably be a $50,000 hit to the budget. And, he says, "that figure doesn’t take into account what may happen with prices over the next few months."

Gasoline prices don’t quit

Jack Harris, manager of Fleet Services, has been facing similar problems when it comes to the price of gasoline. Last month, the average price for a gallon of regular unleaded self-serve gas in Northern California in November was around $1.92, up 49 cents from Novem-ber 1999.

That increase hits Harris, who purchases close to 9,000 gallons of gas a week, hard. One week in October he paid close to $4,500 more for gas than he did for a week in January–and he received 73 fewer gallons.

Part of Harris’ job includes projecting what gas prices will be for each academic year. "We’re crystal-balling price," he says, "and we are estimating how much fuel we’re going to use." But, he says, Fleet Services is not always prepared for unexpected increases and must pass on the rising costs to other departments.

There are two main users of vehicles on campus–those who have vehicles assigned to them and those who check them out on a daily basis. Assigned vehicles are by far the largest group, with 564 vehicles leased on a long-term basis by such departments as Facilities and the Police Department. In addition, there is a daily checkout pool of 134 vehicles. For long-term leases and daily rentals, de-partments pay a fee plus a cost-per-mile charge that covers fuel only.

Harris says that for departments dependent on Fleet Services, a small increase in the per-mile charge can impact them elsewhere.

Those in charge of department budgets agree. "We can’t change our rates to customers to compensate for the rise in fuel costs," says Susan Wagler, business office manager for structural facilities, "so it cuts into our other operating expenses, such as purchasing new equipment and training."

For Facilities Services structural operations alone, higher mileage rates have increased operating costs by $103 per vehicle a month in the past year.

Police can’t curb patrols

For the Police Department, which leases 14 vehicles and purchases gas from Fleet Services, a small increase can make a fairly large impact.

Cecilia Chang, business and finance manager for the Police Department, estimates that, by next spring, the department will have paid over $6,000 more for fuel than it did in the previous 12 months. This does not take into account a one-cent per mile increase scheduled to go into effect in January.

Chang says that the department has a small carry-over budget to help defray costs, but, she says: "Given that we have such a small operating budget, the $6,000 increase is significant."

According to Lt. Joyce Souza, the budget does not get bumped up to compensate for a rise in fuel costs, so the department has to make up for the cost in other ways. "Our mileage is a huge part of policing," Souza says. "We have to be out there patrolling, so we just do without something else."

Harris of Fleet Services says the campus should prepare itself for even higher gasoline prices. He bases his projection on the idea that the rest of the country is headed for reformulated fuel.

"I would guess it’s going to go up to $3 a gallon because all the refineries are going to have to update their equipment and the customer is going to pay," he says.

Fuel efficiency is crucial

In preparation, Fleet Services will be buying more fuel-efficient replacement vehicles next year. For example, they will purchase four-cylinder Ford Focuses for better fuel economy and have requested V6 pickup trucks instead of the V8 pick-ups that the state contract calls for.

"The campus has been proactive all along," Harris says. "We run a lot more alternative-fuel vehicles than most fleets."

One of the biggest challenges to alternative fuel vehicles, Harris says, is user acceptance. Harris, who drives one of the fleet’s Honda EV Pluses, advises: "That’s the future–embrace it now."

UC Davis’ Hybrid Electric Vehicle Center has embraced the future–it’s developed a vehicle that uses both electricity and gasoline. "When it’s running on gas alone," says the center’s director, Professor Andy Frank, "it still gets double the fuel economy of a regular car."

The advantage to hybrid vehicles, he says, is that you don’t have to recharge. "The trip cost goes down by a factor of three," he says, comparing it to gasoline-only vehicles. "And you don’t lose any performance capability."

Hybrid technology works in small cars and in very large vehicles as well. The center’s Future Truck Program’s latest project is a 6,000-pound hybrid Suburban that can pull a 7,000-pound trailer.

Partners for a solution

Fleet Services stays in contact with the Hybrid Electric Vehicle Center about the latest technolog available, and there also has been talk of a joint-use fuel-cell research facility shared by Fleet Services and the Institute for Transportation Studies.

Harris sees these projects as good examples of service units partnering with academic units to find a solution to the fuel crisis on campus.

As for natural gas, Roberts, the energy conservation engineer, believes the situation will remain volatile for at least another year. "A lot of this problem is due to the growth of California in the last few years," he says. "It has put a serious crimp in the state’s electrical and gas infrastructure."

Roberts has worked on projects that have cut natural gas use on campus by about 8 percent and electrical energy use by 13 percent. But there is more to do. He is now drafting a letter asking departments for help in cutting energy use.