Energy Procurement Best Practices for Multi-State Assisted Living Operations

Energy procurement is a critical yet often overlooked aspect of financial and operational management for multi-state assisted living operations. These facilities face a unique set of energy procurement challenges, requiring the skillful navigation of a patchwork of state regulations, diverse energy markets, and varying facility needs across their portfolio.

The stakes are high. Energy costs typically represent the third largest operating expense for assisted living facilities. This budgetary line item impacts profitability and the quality of resident care. As the population ages and the industry grows and consolidates, operators must optimize their energy strategies, reduce costs, and maintain efficiency without compromising resident comfort.

Innovative approaches to new site development, the strategic use of existing energy contracts, and the critical importance of energy due diligence during the acquisition of new properties are among the best practices recommended for those in the industry.

New site development and contract efficiency

Efficient energy procurement for new multi-state assisted living operations is a critical part of energy strategy. Leveraging existing contracts and implementing strategic approaches allows operators to significantly enhance energy management and cost-effectiveness across their growing portfolio.

With facilities spread across different regulatory environments and energy markets, operators must navigate a complex landscape to ensure cost-effective and efficient energy management. 

Some of the most useful strategies for tackling this challenge include using add/delete clauses, negotiating flexible terms with suppliers, and leveraging aggregation strategies.

Using add/delete clauses in energy contracts

One of the most effective methods to incorporate new facilities into existing energy agreements is through add/delete clauses. These clauses provide flexibility to adjust energy contracts as operations expand or contract.

Energy procurement specialists can negotiate energy supply agreements that include this language to allow for a certain percentage of change in energy consumption, typically ranging from 5% to 20%.

Incorporating these clauses allows multi-state assisted living operators to:

• Add new facilities to existing contracts without incurring higher market rates.
• Avoid signing entirely new agreements for each additional site.
• Maintain consistent pricing across their portfolio, even as they expand.

Add/delete language may come with a slight premium. However, the long-term benefits often outweigh the initial cost, especially for growing organizations.

Leveraging aggregation strategies

Aggregation is a powerful tool for creating buying power in the energy market. It benefits new and existing facilities.

Combining the energy consumption of multiple sites allows assisted living operators to:

• Negotiate more favorable rates and terms with suppliers.
• Access better energy products and contracts typically reserved for larger consumers.
• Reduce overall energy costs across the portfolio.

For multi-state operators, this may involve creating internal aggregation strategies within their network of facilities. The increased scale from aggregation leads to cost reductions, with some cases showing supplier margin reductions.

Energy due diligence for growth through acquisition

As multi-state assisted living operators expand their portfolios through acquisitions, conducting thorough energy due diligence becomes a critical step in the process. This comprehensive evaluation of energy-related aspects helps assess the true value of the target facilities and identifies potential risks and opportunities for improvement. 

Performing detailed energy due diligence allows operators to make informed decisions, optimize energy strategies, and experience a smoother integration of new facilities into existing operations.

This phase of energy procurement for multi-state assisted living organizations includes several key steps.

Step 1: Analyze historical energy consumption and costs

The first step in energy due diligence is to thoroughly examine the historical energy consumption and costs of the target facilities. This analysis provides valuable insights into the energy performance and efficiency of the properties under consideration.

Here’s how to do it:

• Review utility bills for at least the last 24 months to identify consumption patterns and trends.
• Calculate the energy use index (EUI) for each facility to benchmark performance.
• Compare the target facilities’ energy costs to industry standards.
• Identify any anomalies or unexpected spikes in energy usage that may require further investigation.

Step 2: Evaluate existing energy contracts and obligations

The second step involves assessing the current energy contracts and obligations of the target facilities. This helps energy procurement specialists understand potential liabilities and opportunities for optimization.

Start by reviewing all existing energy supply agreements, paying close attention to terms, rates, and expiration dates. Then, identify any long-term commitments or unfavorable terms that may impact future energy procurement strategies.

After gathering those critical details, evaluate the potential for contract renegotiation or consolidation to achieve better rates.

Step 3: Assess building and equipment energy efficiency

Step three involves conducting a comprehensive evaluation of the building’s energy efficiency and the condition of energy-consuming equipment. Doing so identifies potential areas for improvement and estimates future capital expenditures.

A thorough assessment includes:

• Conducting an ASHRAE Level II Energy Audit of the overall energy performance of all facilities.
• Evaluating the age and condition of major energy-consuming systems (HVAC, lighting, water heating).
• Identifying any outdated or inefficient equipment that may require replacement or upgrades.
• Assessing the building envelope (insulation, windows, roofing) for energy efficiency improvements.

Step 4: Identify potential risks and opportunities

The fourth step uses information from the analysis of energy consumption, contracts, and equipment to identify potential risks and opportunities to enhance energy performance.

Here is the most important data to examine:

• Compliance with current energy codes and regulations that includes the risk of future non-compliance.
• Energy efficiency upgrade opportunities (LED lighting, building automation systems).
• Renewable energy installation potential to reduce grid dependence.
• Demand response program feasibility to generate additional revenue.

Step 5: Develop a plan to integrate new facilities

The final step in the process is to create a comprehensive plan to seamlessly integrate the newly acquired facilities into the existing energy management strategy.

Do this by:

• Outlining steps to align the energy procurement processes of new facilities with existing operations.
• Developing a timeline for implementing energy efficiency upgrades and improvements.
• Creating a strategy for consolidating energy contracts and leveraging increased buying power.
• Establishing a framework for monitoring and reporting energy performance across all facilities.

Build a scalable energy strategy

Developing a scalable energy strategy is critical for energy procurement for multi-state assisted living organizations. A well-designed plan optimizes costs and improves operational efficiency while positioning facilities to adapt to evolving regulatory environments and market conditions.

This seven-pronged approach positions organizations for long-term success in an increasingly complex and sustainability-focused industry.

Execute smart energy infrastructure

Applying smart energy infrastructure is fundamental to creating a scalable energy strategy. This involves using advanced software and hardware solutions to manage energy consumption across all facilities efficiently.

The National Renewable Energy Laboratory (NREL) is supporting a $50 million investment in distributed energy systems. These structures help assisted living operators coordinate and optimize their energy resources across multiple facilities.

Here’s how:

• Deploy smart meters and sensors to collect real-time energy usage data.
• Implement building management systems (BMS) to automate and optimize HVAC, lighting, and other energy-intensive systems.
• Use cloud-based energy management platforms for centralized monitoring and control across multiple facilities.

Participate in demand response programs

Demand Response (DR) programs offer a significant opportunity for multi-state operators to generate additional revenue while supporting grid stability. Facilities can earn payments for reducing their energy consumption during peak demand periods.

To reap these benefits:

• Enroll in available DR programs across different states where facilities are located.
• Integrate automated systems to respond quickly to DR events, which can occur with as little as 10 minutes’ notice.
• Train staff in DR procedures for smooth execution during events.

Invest in renewable energy

Investing in renewable energy sources, particularly solar panels, can help reduce grid dependency and potentially generate additional revenue by selling excess energy back to the grid. To get started, conduct feasibility studies for solar installations across different facilities. Then, consider power purchase agreements to minimize upfront costs.

Lastly, explore virtual net metering options in states where available to maximize benefits across multiple locations.

Align internal stakeholders

Creating an energy committee that includes representatives from facilities management, finance, and procurement can ensure informed decision-making and smooth implementation of energy strategies.

Here are some tips to make the process smoother:

• Establish regular meetings to review energy performance and strategy.
• Develop clear communication channels between facilities and the central energy management team.
• Create standardized reporting mechanisms to track progress and identify areas for improvement.

Use analytical tools

Employing advanced analytical tools is crucial for optimizing energy purchases and forecasting market trends across multiple states. Using predictive analytics forecasts energy demand and optimizes purchasing strategies.

Data visualization tools identify consumption patterns and anomalies. Market intelligence platforms help facility operators stay informed about regulatory changes and market opportunities in different states.

Consider ESG factors

Energy efficiency measures and sustainable practices help multi-state assisted living facilities comply with ESG standards, potentially attracting environmentally conscious investors and residents.

• Develop a comprehensive ESG strategy that includes energy-efficient goals.
• Implement green building certifications (LEED, ENERGY STAR) across facilities.
• Communicate sustainability efforts to stakeholders, including residents and their families.

Smart energy procurement for your multi-state assisted living facilities

Multi-state assisted living operators face both challenges and opportunities in managing their energy procurement strategies. Implementing smart energy infrastructure, participating in demand response programs, investing in renewable energy, and leveraging group purchasing power allows operators to significantly reduce costs and improve operational efficiency across their facilities.

As the New England building energy management system market continues to grow, with an estimated value of $767.6 million in 2025 and a projected CAGR of 10.7% from 2025 to 2030, the time is ripe for multi-state operators to reassess and optimize their energy strategies.

Don’t let the complexities of multi-state energy procurement hold your organization back. Take control of your energy future today by partnering with the experienced energy procurement specialists at Kobiona who understand the unique challenges and opportunities in the assisted living industry.

Contact our team today to develop a comprehensive, scalable energy strategy that will drive cost savings, improve operational efficiency, and position your multi-state assisted living organization for long-term success.