Karla Evert, vice-president of materials management and product development for St. Cloud, Minn.-based Stearns Manufacturing Co., knew there had to be a way to reduce the company's energy bills, which reached $68,500 in fiscal 1981. The 120,000-square-foot building, which houses the factory and offices of the $15.5 million-a-year life-jacket manufacturer, is only 10 years old, and an inspection showed that insulation was "quite adequate." So Evert figured she could cut costs by simply having employees turn heating and air-conditioning up before opening and down before closing. But there were too many thermostats to handle, and it "became a nightmare," says Evert. The answer was the installation of a Honeywell W7000 load-control system. The payoff was almost $16,000 in energy savings in fiscal 1982.

The W7000 is one of hundreds of energy management systems (EMS), sometimes referred to as "black boxes." These devices are microprocessor-based units, usually not much bigger than fuse boxes. Mounted on a wall, they are programmed to switch energy-consuming equipment on and off at prespecified times or, in more sophisticated units, according to variables such as outside temperature or humidity. An EMS is simply "a light switch with a brain," says Steven Bennett, executive editor of The Energy Cost Cutter, a newsletter for businesses and industry (P.O. Box 78, Cambridge, MA 02138; 12 issues/$59).

Energy management systems have been around for a long time, but until five or six years ago, says Bill Dillard, secretary of the Orlando, Fla.-based Energy Management Contractors Association (EMCA), they were like a "white sidewall tire, something you'd hang on there if you had the money." But the sharp increase in energy costs has made them more popular with smaller companies. And, as computer chips have become less expensive, capabilities have gone up while prices have come down.

Depending on their complexity and the number of systems they control, the devices generally cost from $2,000 to $250,000, including installation charges, which can vary widely. You can, however, install a system that handles just one thermostat for as little as $500. The most expensive microprocessor units control up to 256 points, or loads -- the individual pieces of equipment, such as air conditioners and light circuits, which a device monitors.

Also on the market are energy management systems that are more like traditional computers, with keyboards, mass storage, and cathode ray tubes (CRTs). These will handle anywhere from 100 to more than 6,000 points and can be linked to security and fire-protection systems. The black boxes contain fixed software; users can program them only for certain functions, such as changing the time of day for activating a system. The computers are far more flexible -- and expensive, from around $50,000 to $1 million.

Unless you have a very large facility with several buildings, or want to expand in the future, you probably don't need a computer, says Robert Tinsley, engineering supervisor for Robinet & Associates Consulting Engineers Inc. in El Paso. "For the average small business, say a facility anywhere from 10,000 square feet to around 100,000 square feet," says Tinsley,"the black boxes are all you need." If you have more equipment than one unit can handle, you can tie several together through a central console.

The W7000 unit has proven ample for Stearns's requirements. Linked to 19 rooftop air-conditioning and heating units, the device helps reduce the company's consumption of electricity, natural gas, and propane by automatically setting back the heating, ventilation, and cooling systems at night and on weekends and turning them up again for the workday. It also cuts energy use by "duty-cycling" -- turning electrical equipment, such as air conditioners, on and off for short intervals during the day.

Electric-utility companies base an entire year's billing on a user's peak demand -- the period of highest consumption. "If we could reduce our peak demand that one or two days when it hits 90 degrees," says Evert, "we could reduce our bills substantially." The EMS lowers this demand by shutting down three or four air conditioners at once on a rotating basis, an operation known as demand control. (Another method of demand control is to "shed" loads, that is, turn off pieces of equipment in an order determined by the user.) "We had maybe two days out of the summer when it was a little warmer than usual and a little warmer than we'd like it to be, but we decided we could tolerate that to keep our peak demand down for the rest of the year," says Evert.

The system was installed in March 1981, by Advanced Energy Systems Inc., of New Hope, Minn. If it had purchased the W7000, Stearns would have paid $29,000. Instead it leased the system for $787 a month for five years with an option to buy the equipment for $2,000 at the end of that period. By the time the fiscal year ended in june 1982, Stearns calculated it had saved $15,690 at 1981-82 energy prices, not including a $6,000 energy tax credit it earned for the year. The figure topped the savings estimate given by Advanced Energy by more than $3,000. "We are extremely pleased with the system," says Evert.

Not every company's experience with an EMS is as positive as Stearns's. Darrell Sanderson, division manager of ProGraphics, the 32-employee, Clearwater, Fla., color-separation division of Progressive Graphics Inc., paid $10,000 for a Pacific Technology Load Programmer Basic 8 system. "I'm an anti-gadget person," Sanderson says. But he warmed to the idea of an EMS when a salesperson told him of the savings possible. Now, he says, "I'm not as happy as I thought I would be when I authorized the purchase."

When Suncoast Energy Controls Inc., in Largo, Fla., installed the Basic 8 in ProGraphic's 12,000-square-foot building, Sanderson was told the system would pay for itself in less than three years. "We now feel it will be in the neighborhood of five years," he says. But, he adds, "I don't think they could have picked a more complicated building or existing setup and conditions than we have."

Sanderson explains that the building "is just a maze of small rooms." Its nine central air conditioners and heating units -- eight of which are controlled by the Basic 8 -- and two window units are a jumble of new and old equipment. Air conditioning must stay on year-round to prevent humidity from harming sensitive materials. In the winter it alternates with the heating. Some parts of the plant operate 24 hours a day, and temperatures in critical areas must vary no more than plus or minus nine degrees.

In addition to the inherent difficulties of controlling his operation, Sanderson has another problem. When something goes awry, he must determine if the fault lies with the EMS or with the air conditioners, so that he can decide which company to call for service. When he calls oiae, it blames the other. It is as if, he says, "you've got a problem with your hand and don't know whether to see a chiropractor or an orthopedic surgeon -- and neither one of them cares for the other."

Despite the disappointments, Sanderson would install a system again if he had it to do over. Not having to run around the plant adjusting nine air conditioners is a great convenience, and he likes the fact that the device prevents employees from playing with the thermostats. Previously, he says, if the employees were hot, "they'd turn it way down and go home, and if you didn't walk around and monitor all weekend long, the place would turn into a meat locker." And he is confident that duty-cycling, by turning the air conditioners off so many minutes out of every hour, will extend the life of his equipment.

Besides, Sanderson is also saving money. The precise amount is difficult to estimate, since the company has grown and conditions have changed (more operations are three-shift, for instance). But its electric bills run from $1,600 to $1,900 a month now, while last year they ran about $1,800 to $2,000.

While Stearns leased its equipment and Sanderson bought his outright, the highly competitive energy-conservation field has spawned a curious third method for businesses that want to install energy management systems: so-called shared-savings programs.

Thomas Dreessen, senior vice-president of finance and franchise operations for Ron's Krispy Fried Chicken Inc., a $17 million-a-year Houston-based fast-food outlet, is a shared-savings enthusiast. He is so enthusiastic that he became a partner in D.T. Energy Savings Inc., nine months after D.T. installed energy management systems in the 43 company-owned stores.

With shared savings, a business pays either nothing for a system, or, as in the case of Ron's, a small installation fee. (Ron's paid $250 per store.) The company installing the unit then takes a percentage of the amount saved monthly; it also receives any tax credits. Ron's has agreed to pay D.T. half of its savings for five years. If Ron's does anything to increase its energy usage by more than 5%, D.T. can recalculate the base year against which savings are measured.

Dreessen says that in 1982, savings, which are measured by comparing kilowatt hours used in one year with those used the previous year, totaled $80,000. "I would have been crazy not to do it," he says. "A guy comes in and says, 'Let's put it in and if it doesn't save, you don't pay me a nickel.' How could a prudent, pragmatic person turn this down?"

Many observers, however, warn businesspeople to approach this kind of plan with caution. There is a potential pitfall if savings are not measured accurately. "Make absolutely certain what your base-line energy is and how much the shared-savings people are going to get, and determine exactly the formulas that are going to tell you what is being saved, advises Robinet & Associates' Tinsley. "Otherwise you can get into very big trouble, very quickly."

EMCA's Dillard claims that many shared-savings companies vastly inflate both the savings and the cost of the equipment. The IRS, he says, is looking closely into companies that increase prices in order to obtain a larger tax break. Before entering into this kind of scheme, Dillard says, "you should know who the investors are, what their capital investment is, and how they represent it to the Internal Revenue."

There are more than 300 microprocessor manufacturers and hundreds more energy management companies that install the devices. Increased competition, says Dillard, has produced a "lot of bad apples," since "there's tons of money to be made without too much capital outlay." But real savings are also possible, anywhere from 10% to 40%, depending on the application and on how much energy is really being wasted.

Before buying, get in touch with a member of the EMCA or a professional engineer who has had experience with energy management systems, recommends Dillard. The EMCA will provide a list of members in your area and a list of the major hardware vendors.

If you choose to go directly to a vendor, Dillard suggests the following:

* Obtain a list of references and check them out.

*Make sure the vendor is either a licensed electrical or mechanical contractor.

* Find out if you or someone in your company will be able to operate the system or whether it requires off-site service or comes with an expensive service contract.

* Insist that the vendor does a thorough analysis of your company's previous energy use. If any savings claim is made, obtain a detailed breakdown of how those savings will be realized, what strategies the company will use, and what impact the EMS will have on building comfort and equipment life.

Karla Evert, for example, looked at half a dozen companies before settling on Advanced Energy Systems. Advanced Energy established a base level for consumption by examining two years of Stearns's energy invoices and analyzing annual weather variations. Since the energy company seemed so certain that Stearns's payback would be less than two years Evert asked for -- and got -- a written guarantee.

For an additional $34 a month, Stearns is connected by computer to Advanced Energy, which monitors the system and provides the manufacturer with periodic analyses of its energy usage. "We wanted to be sure that the cost-justification was there and was being met unequivocably," says Evert.

Still, Dillard points out, "you can't solve all your energy problems with a box on the wall or an energy management pill. You need a good maintenance program, good mechanical systems, and periodic inspection of those systems."