Bulk buying of electricity may yield big savings for cities, businesses
August 6, 2015
Gerry Tuoti – Wicked Local Newsbank Editor | Kevin P. O’Connor – Herald News Staff Reporter | January 19, 2015 | The Herald News
With higher electric rates taking effect this winter, some municipal and business customers are exploring bulk purchasing groups as a way to keep energy costs down.
“There’s been a significant spike in interest among municipal leaders looking for ways to mitigate sharp increases in utility rates,” said Brian Murphy, president of Marlboro-based consulting firm Colonial Power Group.
Businesses are also forming purchasing groups. In April, the state-backed MassDevelopment launched the Massachusetts Manufacturing Energy Collaborative, or MassMEC. The purchasing group, which is intended to give a boost to the state’s manufacturing sector, now has more than 100 member businesses.
Massachusetts is one of a half-dozen states that allows cities and towns to pool all their residents and businesses into buying groups to purchase electricity in bulk, often resulting in a cost savings for residential and commercial customers within the participating municipalities. That process, called municipal aggregation, began in 2004, when a group of 21 Cape Cod communities formed the Cape Light Compact.
The South Coast was an early adopter, according to Robert Mellion, president of the Greater Fall River Chamber of Commerce.
“Several years ago, both the Fall River area and the New Bedford area chambers partnered to form the South Coast Electric Power Group,” Mellion said.
Both the cites of Fall River and New Bedford are members of the group, as well as several companies in the industrial parks in the cities that are heavy users of electricity.
“We constantly hedge and get the best price for the members,” Mellion said. “We’ve easily saved members $20 million through the years.”
The group works with Source One, an energy consultant, to buy energy futures in an attempt to blunt future hikes in energy costs, Mellion said. It has been successful.
The idea is growing locally, he added. The Southeastern Regional Planning and Economic Development District is working to form another aggregate in the area, this one for residential users and small businesses.
That aggregate should be ready to accept members sometime this year, Mellion said.
Interest in such groups has risen in recent months.
“People are getting bills from the Nov. 1 increase from National Grid and will soon be getting bills from the Jan. 1 increase from NStar, and that will bring the matter home that rates are increasing significantly,” said John O’Rourke, regional director of marketing for the Conway-based consulting firm Good Energy. “We’ve seen an increased interest in municipal aggregation.”
Citing constrained capacity on natural gas pipelines feeding New England power plants, National Grid and NStar announced late last year that they were raising rates an average of 37 percent and 29 percent, respectively.
Across the state, there are 19 approved municipal aggregations encompassing 39 communities. An additional 35 cities and towns are awaiting approval of their proposed municipal aggregation plans from the Department of Public Utilities.
