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Municipal Electricity Aggregation: Does it Make Sense for Your Organization?

Are you considering joining a municipal aggregation program or have you recently been notified that you will be auto-enrolled in one? It’s important to first weigh the pros and cons and take an unbiased look at what makes the most sense for your business. History shows that buying electricity as an aggregated group does not always yield a lower price. In fact, some customers receive a better price and negotiate a more advantageous supply contact without an aggregation. 

If you are a Boston-based business, you may have already received communication regarding the Community Choice Electricity Program, a municipal program that aims to give eligible Boston businesses greater control over their electricity by buying electricity on their behalf. Set to launch in February 2021, the City of Boston’s program will be the largest municipal aggregation program in the entire state. According to the city’s website, “by combining our collective buying power, the City of Boston is able to provide affordable and renewable electricity to the program’s customers. You must be a resident, organization, or company based in Boston to participate in the program.”

The bottom line: this could be advantageous for your organization or business, but it’s important to note that this is not your only option. Let’s start by taking a look at a few key factors to consider before opting in or out of a municipal aggregation program: 

Is it to your benefit to be grouped with other businesses and organizations? 

The answer is: It depends. 

The reality is, with a municipal aggregation some participants end up subsidizing others. Suppliers may provide a lower price for an aggregated group with a large volume of kilowatt hours (kWh), but each consumer also has a unique usage profile, credit status, and payment history. These are all factors that suppliers scrutinize. Suppliers offer better prices to a customer with excellent credit, a spotless payment history, and an attractive usage profile. Do you want to be grouped with electricity customers that have poor credit, inconsistent payment histories, and less attractive usage profiles?

Does a “one size fits all” solution make sense for your business? 

Perhaps. But again, let’s consider what your energy needs and budgetary goals are first.

Participants in the aggregation must accept the aggregation’s “one size fits all” solution, therefore surrendering all bargaining power to the aggregation’s manager. This may work to your benefit…but not necessarily. The aggregation’s manager is responsible for interactions with suppliers for price discovery, negotiating the supply contract, and educating participants. This fiduciary will determine the final contract terms and price. If you are looking for a customized solution that is tailored to your needs, consider utilizing an energy consultant for an independent, unbiased review before deciding to not opt out.

Will the aggregation’s fiduciary provide competitive pricing from a variety of suppliers? 

Unfortunately, not necessarily.

If your goal is to obtain a competitively low price, then price discovery should be received from a variety of fully-vetted suppliers, not just one. Due diligence of suppliers includes investigating each supplier’s licensing, billing policies, financial status, management structure, and customer service procedures. Price discovery should include a “green apples to green apples” comparison to ensure that all prices include the same price components, such as energy, capacity, line losses, sales taxes, etc. Does your aggregation’s fiduciary make many suppliers compete aggressively for your business?

Have historical pricing and price trends been fully considered? 

Timing is important – and so are historical pricing and trends.

Electricity prices change constantly during each day and can fluctuate dramatically in a few days, which is why it is important to research historical price information and understand price trends. An unbiased, independent energy consultant can provide education and insights, monitor the electricity market, and identify a good time to buy.

Is an electricity aggregation the best solution for you? 

The answer is an indeterminate: maybe...but that’s ok!

The good news is a full evaluation by an independent, unbiased energy consultant can answer all of your questions in short order. Contact one of our energy consultants for a complimentary analysis of your options for the upcoming municipal aggregation.

Contact: Oliver Hoad | 443-223-4023 | ohoad@appienergy.com