ACHRNEWS

Unicom begins assembling contracting unit in Chicago

May 12, 2000
Unicom Corp., which owns Chicago’s Commonwealth Edison and other electric and/or gas utilities nationwide, has begun building a Midwest-wide mechanical contracting company with the acquisition of two Chicago-area contractors.

The initial components of the business, which targets the industrial-commercial end of the mechanical contracting market, are Midwest Mechanical in west suburban Willowbrook, and V.A. Smith Co. in north suburban Wheeling.

Both firms now operate as units of Unicom Mechanical Services, which is headed by ceo Kenneth H. Beard, formerly president of Midwest Mechanical.

Expanding reach

According to Beard, Unicom is not only looking into further acquisitions in the Chicago market, but also in several Midwestern cities, including Cincinnati OH, Detroit MI, Indianapolis IN, Minneapolis/St. Paul MN, and Kansas City and St. Louis MO.

“The goal of Unicom Mechanical Services is to become a major presence in the installation and maintenance of hvac equipment in new construction and existing buildings owned by industrial and commercial customers in the markets we service,” Beard said.

Targeted customers include owners of office buildings, retail stores, light and heavy manufacturing facilities, hospitals, and health care facilities. Large restaurants are also a possibility.

Unicom is targeting these markets because they offer great opportunities for business expansion, Beard added.

Contractor shock

The acquisitions caught local mechanical contractors by surprise, especially since before the first purchase Beard had been very active in the local chapter of the Sheet Metal & Air Conditioning Contractors National Association (SMACNA).

“This is certainly going to change the dynamics of the local industry,” said John Shaw of Westside Mechanical, Naperville, IL.

Forming Unicom Mechanical Services gives Commonwealth Edison a sister business in which to refer hvac work it now contracts to independent contractors, he said. For instance, Edison has been putting ice plants in local buildings to provide chilled water. It now has a captive contractor to install and maintain this equipment, Shaw explained.

Jack Gengler, of Gengler Lowney Laser Works, Aurora, IL, agreed.

“I see Unicom’s new business hurting local independent contractors,” Gengler said. “Unicom has deep pockets and lots of contacts throughout the Chicago market. They have the means to seize a greater share of local hvac- and energy-related business from family-owned concerns that lack the same resources.”

Utility contracting: maybe not so good

Shaw credited the formation of Unicom Mechanical Services on a national trend among utility owners to diversify into unregulated business areas to compensate for possible loss of energy-delivery customers that may result as states introduce competition into the energy industry.

But he added that turning to industrial-commercial mechanical contracting might not be a good thing. Shaw cited other utilities that expanded into mechanical contracting — such as Jamaica Power & Water in New York — who beat a quick retreat a few years later.

“A mechanical contracting business is only as good as its personnel and the work they provide,” Shaw said. “Independent contractors who can maintain work quality can compete.”

Part of Unicom’s expansion strategy is to acquire firms that not only provide above-average services, but also have a good presence in a market. The ability to serve customers throughout a market is more important than the firm’s location within the market.

Midwest Mechanical met this criteria because it has more than 1,600 commercial and industrial customers, and also works with developers and general contractors as a subcontractor to design, install, and maintain hvac equipment.

V.A. Smith has more than 400 customers in the Chicago area, including Coca-Cola Bottling, GE Capital, Hyatt Hotels, and Sony Corp.

Creation of the unit also helps Unicom fulfill its corporate business strategy to provide a portfolio of energy products, services, and new technologies for delivering energy solutions for business customers in the Midwest, Beard added. For instance, the unit will now directly provide mechanical services to the Unicom Energy Solutions unit.

Sidebar: Boiler plant energy savings to heat up at housing authority

The New York City Housing Authority is expected to save time, energy, and money with the help of an energy-efficiency program developed by the Department of Energy’s (DOE’s) Pacific Northwest National Laboratory, Richland, WA.

Under a recently signed contract with the housing authority, Pacific Northwest will provide an integrated diagnostic monitoring and maintenance program for a central boiler plant. The plant serves about 4,500 residents of Smith Houses, a housing complex of 12 buildings in Manhattan. The program, called Decision Support for Operations and Maintenance (DSOM), was originally developed at Pacific Northwest for the United States Marine Corps.

“This system should provide tenants with more reliable heat and hot water, while cutting costs for the housing authority,” said Don Jarrell, Pacific Northwest principal investigator.

The contract states the housing authority will recover the cost of installation, estimated at $1.4 million, within 10 years. If not, Battelle, which operates Pacific Northwest for the DOE, will reimburse the housing authority the difference between installation cost and actual measured savings.

The DSOM has proved successful at lowering costs while increasing reliability at a heating plant at the Marine Corps’ Air Ground Combat Center in Twentynine Palms, CA. Installed five years ago, the system has saved more than $500,000 annually through short-term realized savings and long-term life-cycle savings, says Pacific Northwest.

The housing authority’s DSOM is expected to be operational by summer 2000.

Pacific Northwest’s software will be connected to a network of sensors that monitor components in the boiler plant, and the computer will notify operators when a system is running below expectations, failing, or near failure.

For more information on this technology, contact 888-375-7665 or inquiry@pnl.gov (e-mail).