West Windsor, Ewing, Hopewell and Lawrence townships are jointly exploring government energy aggregation, a program that could reduce utility supply rates for residents and businesses through bulk purchases from third-party gas and electric suppliers.
Citizens, elected officials, and administrators from the four Mercer county townships attended a public meeting on energy aggregation Sept. 18 at the Mercer County Community College Conference Center.
The meeting’s main speaker was Gary Finger, ombudsman for the New Jersey Board of Public Utilities. Finger explained the aggregation program and how it relates to townships and their residents.
Following the presentation, several residents expressed concerns relating to the reliability of third-party suppliers while others voiced support for a greater renewable energy component in any aggregation deal.
“This [energy aggregation] program is trying to provide a bidding opportunity to get a better rate,” Finger said.
The program’s emphasis is on cost savings, and Finger was careful to distinguish that from saving energy. Finger noted that energy aggregation would only save money from the energy supply portion of a resident’s energy bill. The distribution portion of a resident’s electric bill would remain the same.
While BPU regulates distribution companies, utility supply was deregulated in 1999. Since then the supply of electricity has been open to competition from third-party energy suppliers who source their electricity and gas from all over the nation.
That means residents and businesses can elect to purchase their energy supply from a third-party supplier that offers cheaper rates than the incumbent utility, such as PSE&G or JCP&L. BPU licenses suppliers, but the agency does not have regulatory authority over the prices that suppliers charge customers.
The four townships are considering the formation of a cooperative to increase the total amount of energy supply for purchase, a scale-up which increase negotiation power and yield lower prices from the third-party supplier. A better deal could procure lower utility rates for residents and businesses.
One township would take the lead in the proposed cooperative. For a cooperative to be realized, resolutions would need to be passed by each township council. Additional approval by the division of local government services under the state’s department of community affairs is required also.
Under an energy aggregation program, the local utility distributor would still service accounts, read utility meters, deliver gas and electric, and handle all emergencies.
A bulk power supply agreement would not be set at a rate that exceeds the benchmark price, and renewable, “green” energy components may be incorporated. If a township enters into a supply agreement with a third-party supplier, all residents will be automatically covered, with the exception of residents already contracted with a third-party supplier. Residents currently supplied by alternative supplier may opt in to the township agreement if they opt out of their existing contract.
Residents may opt out of an aggregation program with 30 days notice, and businesses would have to opt in. Residents who have opted out can only opt back in after a period of time as stipulated in the township’s contract.
Other townships in the state have issued public bids to hire a BPU-licensed energy consultant to assist in the process of finding an aggregation third-party supplier for residents. Government aggregators must then advertise and solicit a request for proposal from TPSs.
Expenses incurred by arranging an energy aggregation program, such as consultant fees and administrative costs, would be reimbursed by the contracted supplier as part of the bid and so “out-of-pocket” expenses will not be incurred for townships, according to Finger. If a consultant is hired but no aggregation deal is reached, the consultant will bear the cost of services rendered.
Council members from all four townships were present. Sitting alongside Finger at the head of the room were West Windsor mayor Shing-fu Hsueh, Hopewell Township deputy mayor Allen Camon, Ewing business administrator Jim McManimon and Lawrence mayor Cathleen Lewis.
McManimon said Ewing’s municipal buildings have switched to a third-party supplier, a two-year contract that an energy audit estimates has saved the township $200,000.
Multiple government officials expressed concern for how residents would respond to having their supplier switched as part of an aggregation program. In addition to the opt-out option that residents have if a switch were to occur, Finger emphasized the importance of public awareness and reaching out into the community.
Two other concerns raised by local residents related to the reliability of third party suppliers and renewable energy. The volatility of the energy market worried Bill Connolly, a retired Hopewell resident who previously worked in government for 35 years.
Connolly called third-party suppliers “speculators,” asking, “What happens if the vagaries of the contract result in distributor prices being lower?”
Last winter, New Jersey residents who signed variable-rate contracts with a third-party supplier saw their energy savings eroded this past winter when their rates rose sharply, according to press reports. Unlike fixed-rate contracts, variable-rate contracts are subject to market conditions, and last winter’s polar vortex led to a spike in energy prices.
The state BPU received thousands of complaints from New Jersey TPS customers who had switched to third-party suppliers and ended up paying a higher rate than they would have with their incumbent utility. At a stakeholders meeting at BUP’s Trenton headquarters in early September, there was general support for greater transparency for customers deciding whether to switch to a third-party suppliers, according to press reports.
At the start of his presentation, Finger had emphasized the importance of know one’s contract terms. Environmental concerns also dominated the discussion. Multiple members of the audience see any aggregation agreement as an opportunity to make green, or renewable, energy a greater part of municipal usage.
Pam Frank, a Lawrence resident who is also an energy consultant at Gabel associates, cited the energy-purchasing cooperative between Hudson and Essex counties that have saved residents money while also increasing their share of green power usage. When discussing the use of ” green” energy, determining what “green” is and its price premium
are most important, Frank said, though her data indicates that incorporating renewable energy into a a bulk energy purchase has previously not come at a prohibitive price.
Other residents advocated the inclusion of green components for residents who want their electricity to be generated through renewable sources, for example from solar or wind generation. During discussion of “green”energy components, questions were raised on how to verify that unregulated third party suppliers are indeed supplying “green” electricity. Finger said he is “not well versed in that area.”
A Lawrence resident asked where third party suppliers source their electricity, expressing concern for the potential cost of fossil fuel electricity to the environment and community. Finger told her third-party suppliers “get their energy from every source imaginable.”
“I don’t want to be caught up in something because it will save us money but cost us in other ways,” the resident said in return.
