CEP CEP Financial Analysis & Energy Budgeting 2

Question 1

Net Present Value (NPV) in energy project evaluation accounts for which key factor that simple payback does not?

Accepted Answer

Time value of money

Answer

NPV discounts future cash flows back to present value, recognizing that a dollar saved today is worth more than a dollar saved in the future.

Question 2

An energy manager is evaluating two projects with identical NPVs. Project A has a 2-year payback; Project B has a 5-year payback. Which selection criterion would favor Project A?

Accepted Answer

Shorter capital recovery period

Answer

A shorter capital recovery period reduces financial risk and frees capital sooner, making Project A preferable when payback period is the selection criterion.

Question 3

What does a 'fuel adjustment clause' (FAC) on an electricity bill represent?

Accepted Answer

A variable charge that passes fuel cost changes from the utility to the customer

Answer

A fuel adjustment clause allows utilities to pass through fluctuations in their fuel procurement costs directly to customers, adjusting bills up or down accordingly.

Question 4

In energy budget forecasting, which method uses historical energy use per unit of output (e.g., kWh/sq ft) to project future consumption?

Accepted Answer

Top-down intensity benchmarking

Answer

Top-down intensity benchmarking applies historical energy intensity ratios to forecasted production or floor area to estimate future energy use.

Question 5

Which of the following best describes a 'variance analysis' in energy budget management?

Accepted Answer

Comparison of actual energy spend to budgeted energy spend to identify deviations

Answer

Variance analysis compares actual expenditures to budgeted amounts, helping managers identify and explain deviations so corrective action can be taken.

(CEP) Certified Energy Procurement Professional Practice Test

(CEP) Certified Energy Procurement Professional Practice Test

CEP CEP Financial Analysis & Energy Budgeting 2