Energy prospectors aim to help Portland find lower electricity, natural gas bids

By Seth Koenig, BDN Staff
Posted Jan. 08, 2012, at 1:25 p.m.

PORTLAND, Maine — A Portland firm that has made a business out of navigating the complex natural gas futures market and electricity supply landscape has cut some of its clients’ energy bills in half. Competitive Energy Services will now ply its trade for the city of Portland, where officials hope the company can help save tax dollars in what figures to be another tight budget cycle.

“Portland uses — across the city, airport and schools — 30 million kilowatt-hours of electricity a year,” said Matt Thayer, a business development official for Competitive Energy Services. “If you’re able to manage their costs down even a couple of cents across all those kilowatt-hours, it adds up. The city goes through 100,000 decatherms of natural gas a year. If we’re able to manage that down a couple of dollars a decatherm, that’s a substantial savings as well.”

Ian Houseal, Portland’s sustainability coordinator, said Competitive Energy Services as brokers can get the city access to exclusive energy markets, where suppliers often deal in lower rates.

Competitive Energy Services announced Friday the city picked it from a field of 17 competitors to manage Portland’s energy costs. Thayer said the locally based company will be paid per unit of energy the city consumes — around a penny per therm of natural gas and a tenth of a penny per kilowatt-hour of electricity, with rates to slide down as the units increase — in accordance to any contract the company facilitates.

He said the arrangement is open-ended, with either party capable of breaking it off.

“With this economy, people are really looking for new and creative ways to save money, and the old approach [to buying energy], which may have worked well for a while, may not be what they want to stick with,” Thayer said. “Anyone sole-sourcing their load, wasn’t doing the due diligence they could have to uncover additional savings.”

Houseal said the city is in the process of shifting 85 percent of its energy load from oil to natural gas, and Competitive Energy Services was chosen for the consulting work in part due to its expertise with the latter fuel source.

“Because you’re working with a municipal budget, you don’t want a shock,” Houseal told the Bangor Daily News. “You want a relatively easy change of the impact in fees, at least on the upward side. … You also want to be as aggressive on costs as possible. It’s really about cost management, trying to keep those costs low and not buying at the height of the market.”

Competitive Energy Services has built a reputation on keeping close watch of those markets and learning when to lock in prices for electricity and natural gas. While Central Maine Power Co. delivers energy to southern Maine users through its infrastructure of power lines and meters, customers can choose to shop around among electricity suppliers for better rates on the energy itself.

“We help [commercial and institutional customers] figure out when to buy their electricity and natural gas commodities, who to buy it from and what sources to take,” Thayer said. “Of course, I can’t guarantee this, but for some clients, we’ve cut their bills in half through more competitive procurement of their energy. There is a big difference between doing nothing — you’re then taking the default service — and managing it in the market. We introduce the full competitive bid process, so you’re working the entire supplier landscape.”

The company already works with Manchester, N.H., and St. John, New Brunswick, in similar consulting roles, as well as the University of Maine at Orono and Husson University, Thayer said. He said per-unit prices of both electricity and natural gas are heavily based on the trade of natural gas futures on the New York Mercantile Exchange.

“CES was and is a pioneer in representing customers of all sizes, but obviously primarily larger users which use more energy,” said Anthony Buxton, an attorney with the Portland-based Preti Flaherty with an expertise in energy regulation, and a minority stockholder in CES.

“CES and its competitors fill the gap between the customer and the highly complex world of generators, marketers, [New England Power Pool] and ISO-NewEngland,” Buxton, who said he has no management or working relationship with the company, wrote in an email to the Bangor Daily News. “It is very difficult for customers to do this without full-time, dedicated and expensive employees, and even then one or two employees simply cannot keep up. Energy is a futures market, just like pork bellies.”

In the futures market, buyers purchase month-based contracts locking in certain rates. Some of those buyers are speculators, with no interest in using the energy, just hoping to snatch up low-cost claims to the resources and resell them if or when the value goes up. But Competitive Energy Services clients are buying with an interest in actually using the energy and natural gas.

The company will also help the city analyze and develop contracts with winning bidders for its natural gas and electricity needs.

Houseal said the city has paid as much as 10 cents per kilowatt-hour — just for energy being supplied, not factoring in delivery and other costs subsequently added on — and is soon to pay five cents per kilowatt-hour for city facilities with energy supplier Integrys thanks to an initial deal arranged by CES.

Thayer said that, in the competitive marketplace, his company has seen prices around 4 cents per kilowatt-hour, dipping as low as 2 cents in late 2011.

“We just don’t have access to these markets,” Houseal said. “It would be pretty much impossible to do this without somebody brokering for us.”

http://bangordailynews.com/2012/01/08/news/portland/energy-prospectors-aim-to-help-portland-find-lower-electricity-natural-gas-bids/ printed on July 28, 2014