Tips for choosing competitive electricity vendors

Many municipalities have realized benefits from the competitive electricity market. Some work with a competitive electricity supplier, while others have chosen to work with a broker or consultant for their electricity supply purchase.

A broker or consultant is a person or firm that acts as an agent (“middle man”) in the sale and purchase of electricity; they broker the deal between the electricity supplier and the customer, but they never own the electricity.

A competitive electricity supplier is a company or group that purchases electricity from the wholesale market and sells it to the customer. (E.g., Constellation NewEnergy is the endorsed competitive supplier for the MMA’s MunEnergy program.)

When selecting someone to work with in the competitive electricity market, the following are factors to consider:

Industry knowledge
Whether choosing a broker or consultant or working directly with a competitive electricity supplier, ask how long they have been in business and have them describe any recent work with cities and towns. An entity will be better able to serve you if they have experience working with municipalities and understand the importance of a fixed electricity rate that provides budget certainty.

Fees for service
It is simply good business to ask about fees when purchasing any product. The same rule applies to purchasing electricity in the competitive supply marketplace. When working with a broker/consultant or a competitive supplier, ask how you will be charged for their services. Will you be charged an upfront cost or will you be charged a certain rate per kilowatt hour? Are there any other charges you should be aware of? While a broker/consultant may give you access to a variety of competitive suppliers, there may be significant costs to working with them.

Contract terms and size of accounts
The terms of a contract should be given careful consideration, as they may differ greatly among suppliers and brokers/consultants. Some may offer a fixed price for a year or longer, while others may offer a price that varies from year to year. Ask if you are required to stay with the supplier for a period of time or be subject to an early termination fee. Also be aware that many suppliers only want to focus on large accounts, which could leave many smaller accounts exposed to market fluctuations.

Product options
There are many innovative energy solutions your community may want to consider when making your electricity supply purchase. Municipalities that can commit to curtail at least 100 kilowatts of electricity at peak times can sign up to participate in a demand response program. Cities and towns participating in a demand response program agree to reduce their energy output for a specific period of time to make more energy available on the regional power grid. Participants in this program can reap significant financial incentives. Some electricity providers can offer this option at the same time as your electricity purchase.

Earnings through demand response programs can also be utilized by cities and towns that are looking to match energy demand with renewable energy. The most common way to do this is to purchase renewable energy certificates. Not all electricity providers offer RECs, however. If your community wants to take advantage of an array of innovative electricity products, it may be easier to go with a supplier that can offer a more comprehensive approach to energy procurement.

References and licenses
Ask the entity you are working with for references, and ask those references probing questions about the broker/consultant or competitive supplier to determine strengths and weaknesses. Ask your colleagues about their experiences. Also, confirm that the entity you are working with is licensed in Massachusetts by the Department of Public Utilities. The list of licensed competitive suppliers and brokers can be found on the Web site of the Executive Office of Energy and Environmental Affairs (www.mass.gov/eoeea).

After-sales services
Find out what services will be provided by the broker/consultant or competitive supplier after the sales transaction is completed. Being well informed about your electricity usage is also important to effective electricity management. Ask if there is an online tool available to help you view past and current invoices. Determine the process for resolving a billing issue and ask the size of the supporting staff. Find out if there will be a live person you can speak with should you have any questions or concerns.

For more information, contact MunEnergy Program Manager Emily Neill at (617) 772-7513 or emily.neill@constellation.com.