Savings on Electricity Purchases

BMC ANNOUNCES $10 MILLION IN SAVINGS ON COOPERATIVE ELECTRICITY PURCHASES; WILL EXPAND STRATEGY TO PURCHASE OF NATURAL GAS
BALTIMORE (May 7, 2007) –  Since deregulation in 1999, the Baltimore Regional Cooperative Purchasing Committee (BRCPC), a standing committee of the Baltimore Metropolitan Council (BMC) has explored ways to reduce energy costs through cooperative purchasing. Between 2001 and early 2006, BRCPC solicited bids and awarded competitive contracts wherever it identified rates that were lower than “Provider of Last Resort” (POLR)/ Standard Offer Service (SOS) rates prices offered by utility companies.  By purchasing electricity through fixed rate contracts, rather than paying SOS rates, BRCPC saved several million dollars.

BRCPC determined that even lower rates and greater price stability could be achieved by making direct purchases of electricity on the wholesale market.  This strategy starts with the real cost of energy and works up, rather than starting at retail pricing and working down, and eliminates middleman costs.
 
The BMC board retained South River Consulting for advice in implementing the new strategy.  Baltimore County acted as the lead jurisdiction and solicited proposals from over forty suppliers licensed to sell power in the state of Maryland to establish a contract with a supplier to act as an agent to purchase power in the PJM markets. PJM is the largest regional transmission organization in the U.S. electric system.  PEPCO was selected to act as the agent.  South River also agreed to furnish independent advice throughout administration of the new contract.

BRCPC estimated that local governments would collectively save at least $500,000 in the first year, including both dollars saved over the cost of retail rates and savings in administrative costs.  Between June of 2006, when the new purchasing strategy was implemented, and March of 2007, the savings over fixed rate pricing totaled $10 million.  The savings over SOS pricing provided by BGE, the provider of last resort, is $23 million.

“I commend Baltimore County Executive Jim Smith, who during his term as BMC Chair encouraged BRCPC to explore new options for purchasing electricity, for his farsightedness and his commitment to making the best use of taxpayer dollars,” said Harford County Executive David Craig, the current BMC Chair.  “Having seen BRCPC’s success in implementing wholesale purchases of electricity, the BMC Board is excited about the savings that may be realized by applying the same strategy to the purchase of natural gas.”

BRCPC is currently executing a contract with Constellation New Energy-Gas Division for natural gas supply services, with an anticipated savings of $250,000 annually.




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Last Updated: 12/17/2008