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 September 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 (BPU), who 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 — the charge for the generation and transmission of power — of a resident’s energy bill. The distribution portion — based on kilowatt hours used — 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 that source their electricity and gas from all over the nation. This means residents and businesses can elect to purchase their energy supply from a third-party supplier that offers cheaper rates than the incumbent utility — in this area 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 that would increase negotiation power and yield lower prices from the third-party supplier.
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 also required.
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 be set at a rate that does not exceed the benchmark price, calculated based on the cost of basic generation service and compliance with renewable energy portfolio standards for electricity, plus the rate for basic gas supply service. Renewable, “green” energy components may be incorporated.
Under state law, 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 an alternative supplier may opt in to the township agreement if they opt out of their existing contract.
Townships are advised 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 third-party suppliers.
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, so townships incur no “out-of-pocket” expenses, Finger said. If a consultant is hired but no aggregation deal is reached, the consultant will bear the cost of services rendered.
West Windsor officials in attendance included Mayor Shing-fu Hsueh, business administrator Marlena Schmid, and township landscape architect Dan Dobromilsky, as well as Council members Bryan Maher, Linda Geevers, and Peter Mendonez.
Multiple government officials expressed concerns regarding how residents would respond to having their supplier switched as part of an aggregation program. Finger emphasized the importance of public awareness and reaching out into the community.
Concerns raised by residents related to the reliability of third party suppliers and renewable energy. This past winter, New Jersey residents who signed variable-rate contracts with a third-party supplier saw their rates rise sharply, according to press reports.
A 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.”
At the West Windsor Council meeting on Monday, September 22, a resolution to authorize the administration to contract with energy consultant Gabel Associates was tabled after several council members took issue with the contract’s term length. It is expected to be reintroduced before council as soon as October 6, pending the necessary changes.
The administration is seeking to procure electric energy supplies for municipal facilities from third party suppliers and is seeking the services of Gabel Associates, based in Highland Park and licensed by the Board of Public Utilities, to assist with an open bid process.
In addition to seeking cost savings for municipal buildings, township officials want to show residents that procuring energy from a third party supplier is beneficial.
Per industry standards involving contract consultants and third party suppliers, hiring a consultant results in no direct fees to the township. The consultant fee is included in the rate bid, and only when the township contracts with the third party supplier does the supplier pay the consultant as part of its overall bid.
Speaking before the council, township landscape architect Dan Dobromilsky explained that the consultant fee would be deducted from the township’s overall savings through a reduced utility rate. For example, if the township were set to save $20,000 in utility costs and the consultant’s fee were $2,000, the township would still see $18,000 in savings. In other words, the township would still see overall savings, depending on the exact terms of the supplier bid.
“The fees they charge are minimal compared to savings of the energy aggregation,” Dobromilsky said. “We investigated different consultants, and we decided [Gabel] is the best choice. They are the most experienced energy consultant in the state.”
“We didn’t want to be locked into a contract with Gabel for a two-and-a-half-year period of time. To the extent we are not happy with the bids, we want to be able to end the contract with them,” Council President Bryan Maher said in an interview after the meeting. “We wanted to tighten up our ability to get out of the consulting contract.”
Dobromilsky explained in an interview that the term of the consultant contract should match the term of any potential third-party supplier contract, and contract time is one of the possible terms of any bid.
The administration will change the contract term to the shortest possible time, six months, rather than the longest. If a third-party supply bid is longer than the consultant contract term, the contract would need to be extended, Dobromilsky said.
