Good for Business, Energy Cooperatives May Become Top Choice

By George Berkheimer

May 2006



For the past two years, commercial energy users have felt a strain on their pocketbooks from rising operating costs associated with energy deregulation. This summer, the other shoe will drop on residential electricity consumers, who can expect a 72% increase in energy costs in Howard County.

The business community has not been keen to simply sit back and accept rising energy costs, which are expected to increase 42% for commercial account holders this summer. More proactive businesses have taken a two-pronged approach to soften the impact of deregulation by joining energy-buying cooperatives and learning how to reduce energy consumption.

The only good news is that the same options may eventually be extended to residential customers, through the same Columbia-based aggregator and broker that works with Maryland's chambers of commerce and school systems to help them achieve energy price stability.



Current Events

In 2004, the Baltimore/Washington Corridor Chamber of Commerce (BWCC) became the first chamber on Maryland's western shore, and one of the first in the state, to offer an electric purchasing cooperative to its members. Working with licensed aggregator CQI Associates of Columbia, the BWCC's first negotiated electricity pricing contract combined more than 330 accounts for 127 member companies, nonprofits and institutions in mid-Maryland located in PEPCO or BGE franchise territory.

"Overall, [the program] has worked very well," said BWCC President and CEO Walt Townshend. "Our first group got a three-year contract at 6.6 cents per kilowatt hour and is expected to save well over $2.5 million over the term of the contract."

According to BWCC calculations, Type 1 small accounts with an average $950 monthly energy bill have been able to realize savings of more than $600 in the program's first year and more than $2,400 in the second year. Type 2 account holders with an average $2,500 monthly bill realized savings of approximately $2,700 in the first year and $8,000 in the second year, while savings for Type 3 account holders spending $7,000 per month amounted to approximately $11,600 and $24,000, respectively.

Two groups already participate in the BWCC's cooperative, which strives to secure 36-month contracts for each of the groups and negotiate one-year extensions during periods of favorable default rates. A third group expects its contract will go out for bid in mid-May, and a fourth group is already forming.

"We've had a lot more interest in the cooperative program recently because of all the news that has been in the papers," noted Townshend.

On May 2, the Howard County Chamber of Commerce (HCCC) became the latest Maryland chamber to sign with CQI Associates to offer a cooperative service.

"We've had numerous phone calls over the past few years from members who have been interested in getting into a similar program," said Pam Klahr, HCCC president and CEO. "The buzz out there indicates that a lot of people are interested."



Don't Forget Conservation

The HCCC will charge its members a fee of $250 per location to join the cooperative and expects to send its first contract out for bid in time for it to take effect in July. According to Anne Darr, the project coordinator who will oversee the new cooperative, the Chamber will require members to attend an information session before joining.

"CQI will provide information at each of the sessions to help members reduce their consumption," Darr said. Four such sessions have been scheduled for the month of May. The BWCC will hold its own informational series for members interested in joining their cooperative. (Please see sidebar for dates, times and locations.)

According to Dick Anderson, managing principal of CQI, consumers will be seeing steep increases in providers' default rates this year. "Those who signed on to an agreement a year [or more] ago will realize significant savings and we have been able to help with that, but our primary business is to provide assistance in helping companies manage their usage by operating equipment as effectively and efficiently as possible."



Individual Approach

Among reasons cited on CQI's web site for a drastic rise in energy costs this summer, beyond deregulation, are a number of factors that have converged to influence the market. They include projections for the warmest summer in five years, reduced refinery production, increased consumption by the United States and China, increased international terrorism, instability tied to the passing of Saudi King Fahd and severe damage inflicted on the oil and energy industries in the Gulf of Mexico by five hurricanes last year.

"There are huge financial implications both to the taxpayer and for the energy buying process," Anderson said. One of the results has been an increase in requests by individual consumers for CQI to branch out into residential service.

"We have already enrolled some residential customers in the BGE service area as part of our service to the Ocean City and Archdiocese of Baltimore cooperatives," Anderson noted. "We also plan to roll out two or three pilot tests in Maryland during the next 120 days to determine what works best and refine the process for incorporating individual residential customers."

For the moment, residential cooperatives will be limited to consumers who belong to the homeowners' associations and community groups participating in the test period. The Columbia Association will be included among those groups and is currently working on finalizing the details of participation.

"We feel there will be a way within a year for individuals to enroll, and we're committed to trying to do that and expand the program if it works," Anderson confirmed. "The only alternative plan [presented to the Public Service Commission] just offers deferment, but what people really want is stability and savings. Ultimately, we have to see if the PSC approves the plan and see what happens after the legislature and other groups weigh in before proceeding. We don't want to engineer a solution prematurely."



Information Sessions

The Baltimore/Washington Corridor Chamber of Commerce will hold information sessions for member businesses interested in joining its electricity purchasing cooperative on the following dates:

Thursday, May 4, 2006

Thursday, May 18, 2006

Both sessions take place from 3-5 p.m. at the BWCC offices at 312 Marshall Avenue, Suite 104, in Laurel. Contact Shirley Redd at 301-725-4000 to register.



The Howard County Chamber of Commerce will hold information sessions for member business interested in joining its electricity purchasing cooperative on the following dates:

May 2, 8-9:30 a.m., Johns Hopkins University Applied Physics Laboratory, 11100 Johns Hopkins Road, Laurel

May 11, 3-4:30 p.m., Charleston Manor Apartments, 3207 Wheaton Way, Ellicott City

May 16, 3-4:30 p.m., Elkridge Library, 6540 Washington Boulevard, Elkridge

May 25, 8-9:30 a.m., East Columbia Library, 6600 Cradlerock Way, Columbia

Contact Anne Darr at 410-730-4111 for more information.