Energy management systems are used to analyze the efficiency of energy systems and identify any problem areas to lower costs and save energy, typically using energy based performance measurements. Our aim was to use exergy parameters, instead, to see if more accurate information could be obtained about which ener¬gy saving application would result in greater energy savings. Exergy analysis is based on the Second law of thermodynamics and focuses on the environment and the quality of the energy. Implementing an exergetic approach to analyze a steam heating system, we examined data related to exergy flows and exergy losses, and ultimately improved the performance of the system through this energy management model. The following seven energy saving applications were identified and ranked according to their improvement potentials: adjusting the air to fuel ratio – 1, preventing steam leaks – 2, installing an automatic blow down system – 3, insulating the pipes – 4, insulating valves and flanges –5, insulating fuel tank –6, and recovering heat loss from the waste condensate –7. The optimum ranking obtained through the exergy analysis was 3-1-2-5-7-6-4. A reduction of 15.918 kW in exergy consumption was achieved by installing an automatic blowdown system. This meant a total reduction of 1779.03 kg per year in total fuel consumption, $1458.81 per year of cost reduction and the total cost reduction achieved was $1829.25 per year. Making improvements to the seven selected areas in the system, 38.4% of the energy loss was recovered while the recovery in the exergy consumption was 44.5%.