State-Backed MassMEC saves through Purchasing Groups

courtesy of The Patriot Ledger

February 25th, 2015

By Gerry Tuoti and Natalie Ornell

QUINCY – 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.Citing constrained capacity on natural gas pipelines feeding New England power plants, National Grid and NStar have raised rates an average of 37 percent and 29 percent, respectively. And those increases have hit consumer and business bills this year.“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 Marlborough-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.The businesses that have joined the MassMEC purchasing group expect to get comparatively low rates on their utilities.“We combine manufacturers across the state into one pool and go out to bid on electricity and natural gas on their behalf,” said Shaun Pandit, president of Milton-based Early bird Power and manager of MassMEC. “Because we’re buying in bulk, we’ve found it to be 7 percent lower on average than if everyone all goes out on their own.”Savings for individual member businesses may be higher, sometimes reaching tens of thousands of dollars, Pandit said. “The good thing about our group is our terms and conditions are vetted with the state,” he said. It is free for a business to join MassMEC, and there is no obligation to enter a contract, he added.For South Shore businesses that have joined buying groups, results can be mixed. The key, says engineering manager Mike McCormick at Accurounds in Avon, is doing research and picking the right supplier.“We have a current experience now through a company endorsed by MassMEC. It’s a short-term, six-month contract. We might save some money.“In the past we’ve used someone else. We didn’t have any luck with it. It’s sort of like going to Vegas… you’re signing a contract for six months. You don’t know if the price will go up and down. You don’t know if you’ll see any savings.”At Airxchange in Rockland, vice president Dave Kirk said he has used a bulk energy purchasing group since last March. “We used it to help negotiate lower energy costs for us … MassMEC helped Airxchange successfully avoid an automatic fee increase on electric charges, saving the company $2,800 to $3,600 per year over the next three years.”

And for a multiple-location business such as Curry Hardware, the savings can mount up to considerably more.  Company president Sean Curry said he has opted to use a bulk purchasing group for the last three to four years because of the price.  “Pretty simple. Our Quincy location uses the most electricity. Average bill is $35,000 a year. It’s quite expensive with equipment and lights, and paint tinting machines…. Electricity has become a huge part of our expenses.”  “Early bird power in Milton does a great job of searching the market. On Jan. 2, I was almost eight cents less than the utility rate. We’ve been advised to do a one-year contract … If I had to guess we have 30 percent to 35 percent savings. I don’t track it by a monthly basis. Usually, we budget it at $25,000,” Curry said.

Massachusetts has had a deregulated energy market since 1997. Utility providers in the state – companies such as National Grid, NStar and Unitil – are responsible for delivering electricity to customers, but no longer generate it themselves. They instead solicit bids from more than 30 licensed wholesale electricity suppliers, then deliver that power to their customers.  While most customers opt for that basic rate service, anyone is free to shop around for a direct contract with an electric supplier.

There are similar options for homeowners as well, through municipal aggregation, which began in 2004, when a group of 21 Cape Cod communities formed the Cape Light Compact.  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. None of these are on the South Shore.

Gerry Tuoti is the Regional Newsbank Editor for GateHouse Media New England. Natalie Ornell can be reached at [email protected]