Corrections or additions?
This article by Barbara Fox was prepared for the September 3, 2003
issue of U.S. 1 Newspaper. All rights reserved.
The Farmer’s Almanac promises a long cold winter and
a very hot summer. And if you thought the recent blackouts were
wait until you see your next electric bill.
Higher utility prices may not necessarily threaten lives like
do, but they could send shivers down the spines of billpayers who
would otherwise be sweating in the September heat. A shortage of
gas is expected to send prices way up. Meanwhile the fallout from
electricity deregulation in New Jersey is certain to trigger a sharp
rise (see page 46).
But while the politicos grapple with how to price kilowatts and keep
the electricity grids humming, entrepreneurs are seizing the
that the high costs offer.
A 26-year old company founded during the Carter administration (CMC
Energy Services) and a brand new company founded by a former dotcom
entrepreneur (NWatt) have the same idea. They see a business
in encouraging homeowners to invest whatever it takes to make their
homes energy efficient.
NWatt was founded by Jim and E-Ping Medalia on Bertrand Drive, and
Maryland-based CMC has a New Jersey office on Princeton-Hightstown
Road. Whereas CMC’s clients are those who do engineering inspections
(see story on following page). NWatt hopes to work with homeowners
and possibly with tradesmen.
The name Jim Medalia has a familiar ring. JustBalls, his former firm
that sold balls and sports memorabilia on the Internet, was the
of the venture capitalists. In 1998 U.S. 1 put a photo of Medalia
wallowing in a pile of red and yellow plastic balls on the cover,
and similar images graced the front pages of most of the other
in Central New Jersey in 1999, the year that Medalia spoke at U.S.
1’s Technology Forum. Then came the dotcom meltdown. The company
its Canal Pointe office last year. Now Medalia has a day job with
a mortgage company, Washington Mutual, and he and his wife are also
working to launch NWatt.
Says Medalia: "We want to become the brand name for energy
With energy costs going up, he says, there is no better time to get
the attention of the homeowner. And the best times to command
are when someone is remodeling, planning to sell, or planning to
an existing home. NWatt offers to help people save money by showing
them how to spend money.
Pocketbook issues talk more loudly than environmental concerns, says
Medalia. "Homes account for 36 percent of all energy used in the
United States," he says. "But everybody has already tried
the environmental awareness approach. A big part of what we think
is unique is that we are approaching it from the financial aspect.
Improve your investment and raise the value of what is probably your
most important asset."
"We are not here to change behavior," says Medalia. "But
if somebody likes to leave their lights on all the time and the air
conditioner set low, it will cost them 40 percent less to do that.
If your energy bill is X we are going to make it Y."
The way Medalia has it worked out, energy efficient appliances
increase the value of your home. Appraisers and environmentalists
working for the government have said a home appreciates $10 to $20
for every dollar in energy saved annually. If someone saves $1,000
annually on the energy bill, the value of the home increases by
Because the changes will lower your utility bills, the
homeowner is deemed worthy of a bigger mortgage. Meanwhile the cost
of the appliances gets folded into the mortgage or home equity loan,
and the amount saved might be stashed into a college account or other
Just how will this company make money? At each step along the way
— including selling and installing the appliances and brokering
the mortgages. NWatt will franchise the concept. The NWatt brand would
go onto existing trucks, just like the Roto Rooter brand is used by
plumbers to market their services.
Is this just financial smoke and mirrors? You judge. For the
it works like this: All in one fell swoop, you replace the old,
appliances in the house you own or are planning to buy. NWatt takes
care of everything, finding out what you need, making recommendations,
financing, delivery and installation.
Anyone can use the energy saving ideas, but to make it worthwhile
to pay for NWatt’s service, a home’s energy bill needs to be about
$300 monthly or $3,600 a year. This probably presupposes an air
house with four to six occupants.
Here is a hypothetical example. Let’s say you pay NWatt $23,000, a
sum that Jim Medalia calls an "energy investment," to change
a bunch of appliances and improve your HVAC system. He arranges for
about $5,000 of rebates or incentives, which reduces the mortgage
That year your $500 monthly utility bill drops by half, saving $3,000
a year. The annual savings (and the compound interest on it) increase.
After five years you have saved more than $16,000. After 10 years,
more than $36,000. Stack that up against an investment cost of $25,500
after five years, or $32,700 in 10 years.
So after 10 years you have done better than breaking even on direct
costs. Now factor in the assumption that your investment caused your
property value to increase by $30,000 in the first year.
By these calculations, you really come out ahead, and you also have
enjoyed an up-to-date home.
Current competitors are few, though many builders construct new energy
efficient homes, and most home improvement stores offer single
items. One potential competitor, a national siding firm, is reportedly
trying to come up with its own holistic solution, and the federal
department of energy has a pilot program to train and certify
to perform audits and do the replacement work.
"There is plenty of work for everyone," says Medalia.
companies need to enter the market to give credibility to the market
place. We’re the first company with a standardized product and set
of services. We’re the first company that will finance the operation
and manage the operation for the homeowner. We have a solution, the
financing for the solution, and the manpower to install and maintain
the solution. No one was doing existing homes in a meaningful uniform
Nervous about doing a beta test in an occupied home,
the couple bought a four bedroom, 2 1/2 bath house on .87 acre on
Poe Road to use as a prototype. The finished product is listed by
Colleen Hall of N.T. Callaway for $875,000.
The 40-year-old home was in "original condition," meaning
nothing had been done to it in years. "I went out on a limb to
prove that you can be energy efficient and not sacrifice quality of
life," says E-Ping Medalia, who added many designer touches.
erred on the side of good design."
She had energy efficient siding installed and added the following
new items: hot water heater, furnace, attic fan, and a compressor
for the central air conditioner. She replaced everything in the
laundry, and kitchen with top of the line appliances.
She also installed compact fluorescent lights, often in recessed
and where "dimmers" were not needed for atmosphere.
NWatt’s business plan does not include any work on windows and doors,
because this would involve construction, but it does recommend and
get siding installed. It might also recommend devices such as motion
and occupancy sensors, appliance timers, programmed thermostats,
water headers, and air quality monitors. It also recommends changing
even the lowly light bulb. Lighting represents six percent of your
electric bill, and using compact fluorescent light bulbs will save
half of that.
NWatt has good backing. Medalia found a senior loan consultant at
Washington Mutual, John Goedecke, who agreed with his concept. Now
Medalia, as a Washington Mutual mortgage representative, can work
with homeowners to get the NWatt costs folded into the mortgage.
believes the solution can pay itself back within a year. "The
value it adds equates to the cost of adding the appliances."
Only if all the appliances are replaced at the same time will a
difference show on the energy bill. "The savings on buying just
one new appliance is incremental," says E-Ping. "It will not
have an appreciative effect. "
Medalia grew up in the Boston area, the son of a research chemist
and an educator. He majored in film at the University of Cincinnati,
and worked in Manhattan for 20 years before starting JustBalls. His
wife, Hong-Kong born E-Ping, is trained as both an attorney and an
electrical lighting designer. The daughter of an engineer and a
teacher, she went to the University of Wisconsin, Class of 1975, and
Brooklyn Law School, but soon went into technology. They have a
"This is probably one of the biggest risks we have ever
says Jim Medalia. "We are just trying to get people focused on
energy. Do or die, we are not trying to be earth shoe wearers, but
on the other hand, nobody seems to be paying attention. There is no
method to help them at least get comfortable with the idea with
"In our core we believe in energy efficiency as good for the
and as a nation, because we become less dependent on foreign oil.
Individually, collectively, globally, we believe in it. But this is
a business, and we see a business opportunity," says Medalia.
"We are not here to change the world. The business we are building
revolves around filling a need."
Jim and E-Ping Medalia. 609-497-9115; fax, 609-497-9795. Home page:
Joe Iandolo, above, of CMC Energy Services on
Road also wants to encourage homeowners to invest whatever it takes
to make their homes energy efficient.
But whereas NWatt hopes to work with home owners and possibly with
home assessors or tradesmen, CMC targets its software for those who
do engineering inspections. Home inspectors currently do not include
energy efficiency in their reports. With CMC’s audit tool, the
can enhance their report and thus charge more to the new owner. CMC
is also developing a network of reliable contractors to perform the
"The inspector would determine if a home was leaky, average leaky,
or not leaky," says Iandolo. "The homeowner would get a report
estimating what it would cost to make the home energy efficient and
what the savings would be. Our idea is to combine this cost with the
mortgage and to address the problems at the time they move in or
thereafter. What better time to think about energy than when you have
a new home?"
Iandolo considers the appliance purchase a "no brainer."
can go into any store and look at the label contents to see how energy
efficient the appliance is," says Iandolo. What really matters
are what he monitors, the heat leaks.
In addition to the software, CMC employs a more old-fashioned method
— the $200 blower test, to pinpoint the hidden leaks. "You
can find a lot of leaks without using a blower door test but not the
hidden leaks, and sometimes those are costing you a lot more than
the obvious leaks, such as the door or the window," says Iandolo.
Most often used for low income housing projects, the test uses a huge
fan to suck the air out of the house and create a partial vacuum.
A technician goes around the house with a smoke stick — a stick
that produces smoke — to find the intrusion of air, often in the
attic or in what Iandolo calls "thermal pathways," hidden
areas that contain ducts, pipes, or wires. "We plug those up with
caulk, expandable foam, fiberglass insulation, and sometimes even
plastic bags," he says.
Born in Philadelphia, Iandolo went to the University of Notre Dame
in Indiana, Class of 1965, and served four years in the U.S. Air
Then at Johnson & Johnson’s now defunct Chicopee manufacturing plant
he worked as manager of accounting, energy auditor, and controller.
He took a job with CMC in 1986, and is now executive vice president
of the 70-employee firm. Based in Bethesda, the company was founded
26 years ago during the energy-conscious Carter administration by
an economist, Doris Ikle. With a headquarters in Bethesda, the firm
has another office in Pennsylvania.
Beta testing is almost complete on the software program, and if all
goes well it will be licensed on a per-audit basis to members of the
American Society of Home Inspectors or the National Association of
Home Inspectors, or to those who have passed a national certification
test. Home inspectors who use this program can add $75 to $100 to
an inspection that might cost from $275 to $600. The software yields
a report to the prospective homeowner about major energy consuming
systems such as the furnace, windows, etc. and makes a recommendation
about whether, and how, to replace those systems. The report
several contractors who could replace each system.
Over the years CMC has done 200,000 residential audits, primarily
for utilities, but in recent years CMC has been called on mostly for
commercial and industrial energy audits. Most of the 30 employees
who work in New Jersey conduct these audits for utility companies,
especially PSE&G and JCP&L.
CMC is trying to get its energy audit software recognized by Fannie
Mae. "We have to justify to the bank that it will really reduce
the costs," says Iandolo. "The costs are going to be a real
big surprise for people."
"Deregulation was a joke, an artificial red herring," says
Iandolo. "What was saved in rates will come back to your utility
bill next year, so maybe people will pay attention again."
Princeton Junction 08550. Joe Iandolo. 609-936-8900; fax,
Public Service Electric and Gas warns that residential
customers’ electric bills will go up an average of 15.1 percent this
month. This means that the average customer who uses 580 kw hours
per month will see an $8 monthly increase. Gas customers will see
a provisional increase starting September 1.
Why will your utility bill be so much higher this winter? Under
caps for costs were set by legislators who were far too optimistic.
The 1999 reduction for electric rates was nearly 14 percent. "They
lowered the rates artificially," says Jeanne Fox, president of
the Board of Public Utilities, "and the market cost of energy
went up. Why they thought it would go down, I don’t know."
Fox [no relation to this writer] is an unusual example of someone
who worked as a staff member of a government agency and then returned
to be its chief. She and her four brothers grew up in Maple Shade,
where her father was a repair installer for AT&T. A philosophy major
at Douglass College, Class of 1975, she went to Rutgers law school
and worked at the BPU from 1981 to 1991. Under the Florio
she was deputy commissioner of the Department of Environmental
and Energy. From 1994 to 2001 she was administrator for the federal
EPA in a region that included New York and New Jersey. She was
to the board early last year by Governor McGreevey, for whom her
husband, Steve DeMicco, had been campaign director. A supporter of
women’s issues, she serves on the board of, among other organizations,
the Girl Scouts.
Fox explains that, when the cap limits expired on August 1, the
companies could start charging market rates. Also the utilities could
begin adding their $1 billion in accumulated losses to customer bills.
Alone among all the states that set caps, New Jersey’s utilities are
even allowed to charge interest on the losses.
Fox says that the BPU worked hard to keep the new rates low. Among
the BPU’s maneuvers to was to hold "descending clock auctions"
so that utility companies could efficiently bid on the energy supplies
they would need for the year. "That was unique, and it saved the
customers money," says Fox. The BPU also pressured the utilities
to renegotiate some generating contracts and some financial
and it required PSE&G to stop making its customers pay for the
of the Salem nuclear power plant.
Says Fox: "My staff busted their guts. We did a lot of things
to lessen the impact." The result is that consumers are paying
rates either at or below what they were paying in 1999.
— Barbara Fox
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