A NEW HUE OF GREEN – JIMMY PEAK MOUNTAIN RESORT

By: Geanette Catacutan

A ski and snowboard resort in the Berkshire Mountains of Western Massachusetts,

Jimmy Peak Mountain Resort, has completed a successful wind turbine project.
The company was founded on 1940’s. It is a popular winter ski destination – with 45
runs and 9 lifts; has 250,000 visitors annually and another 100,000 for mountain biking
and other activities in the summer. Since machines make most of their snow, the
business is facing a problem because it uses up a lot of energy. Even with strong
conservation efforts over many years that reduced annual energy usage by 25%, the
resort consumes a lot of electricity per year -about 7.5 million kilowatt hours. Of this,
roughly 60% is used during the winter months.

The business incurred cost that had jumped about 90% from 2003-2004 to the 2005-2006
because of oil prices. Thus, they tried to come up with solutions to reduce their
electricity bills and reduce their total cost in general. They already tried to reduce their
electricity costs before the increase of oil prices by replacing incandescent bulbs to
compact fluorescent ones. Outdoor lights were programmed to dim during night
maintenance work. Half of the snow-making system was converted to gravity feed.

The president of the company, Fairbank, wanted to harness the winds on the
mountaintop to help stabilize the cost of electricity so they sought help from Sustainable
Energy Development of Ontario, N.Y.The original plan was to install a 1-megawatt
wind turbine financed by a $582,000 grant from Renewable Energy trust fund,
administered by the Massachusetts Technology Collaborative and a $1.8 million loan
from a local bank. But no supplier was willing to take on the request. Manufacturers
usually supply 10 units and above at a time. But then, GE energy, a unit of General
Electric, agreed to provide the turbine within a year, however, its smallest model had a
capacity of 1.5 megawatts – which was substantially more expensive by $3.3 million.
The problem with this is that Jimmy Peak would have to be sure it wasn’t buying more
capacity than it needed so that the bank would be willing to provide it. Projections
showed that in times of sufficiently strong winds, the turbine could churn out power 24
hours a day, seven days a week, often when the resort doesn’t need much power.
Excess electricity could be automatically diverted to the power grid and sold.

Renewable energy from the wind turbine project can be sold at around $500,000 or
$166,667 per year. This being said that capacity is not anymore their problem, in fact
there would be an excess according to their estimates. Also, aside from the annual
income, the turbine generates about $160,000 per year from the sale of excess electricity
to the power grid and $46,000 annually in production tax credits for the first 10 years.
The maintenance and insurance cost approximately $75,000 per year.

The project uses energy-saving technology that's both cost efficient and
environmentally friendly. According to their estimates, it would offset the emission of
7.1 million pounds of carbon dioxide-- linked to global warming through greenhouse
effect, 3300 pounds of sulphur oxide-- contribute smog and major cause of acid rain,
and 10,000 pounds of nitrogen oxide—found in smog and is linked to asthma.

The result of their project was positive. It resulted to a 25% customer patronage due to
well-publicized environmental commitment and they have saved $450,000 in energy
costs.

Management Accountant can compare the benefits and costs of projects with
environment features. This includes preparing capital budgeting analysis of the
expected cash inflows and outflows, and projecting the expected environmental
benefits. Also, Management accountants can report the results of post-investment
audits and routine budget variances that compare actual results to the expected
financial, nonfinancial, environmental, community, and other benefits and costs. They
can also report the expected and actual kilowatt hours of electricity generated by the
wind turbine, including electricity sold to the grid, which displaces electricity
previously generated by conventional power stations. In addition, management
accountants can assist by preparing cost-benefit analyses of alternative investment
possibilities.