Questions and Answers from EPA s Webinar on Green Power Purchasing Aggregations [a recording and presentations from the webinar are available at: http://www.epa.gov/greenpower/events/28jan10_webinar.htm] Table of Contents: Questions for Stephen Rumpler (Boston Buying Power).2 Questions for James Sloss (Western Pennsylvania Energy Consortium).3 General Questions.4 1
Questions addressed to Stephen Rumpler of Boston Buying Power, Boston, MA: Q: Aside from restaurants, are there other business "clusters" in the 900 businesses? A: In addition to a large amount of restaurants joining the program and other smaller retail customers across the City of Boston s commercial districts, we have been able to enroll some of the largest property management companies in the city [Stephen Rumpler]. Q: What is a standard minimum threshold for electric consumption that would interest an entity like the Taylor Group? A: There really is no minimum to participate in the program. Participation is usually limited by utility requirements such as rate class or monthly demand. In Massachusetts and specifically in Boston they do not have minimums, but most electric suppliers do not serve single family residential homes [Stephen Rumpler]. Q: Can Steve provide more information on the source of the RECs for Boston businesses? Where are the wind farms? A: The RECs are sourced from wind farms. The copy of the REC should indicate the genesis of the power [Stephen Rumpler]. Q: Does Boston buy national wind RECs, or does it require locally-generated wind RECs? A: RECs are national as Massachusetts and New England in general do not have many, if any, major wind farms [Stephen Rumpler]. Q: Based on the savings and number of firms you mentioned the average savings is $1,777 per business. Is that net of all programs operating costs? If not, what are the net savings per customer? Also, how many staff do you have to administer this program? A: Savings are net to customers. There are no program operating costs to the city. Program administrator (Taylor Consulting) covers the operating costs of the program [Stephen Rumpler]. Q: Is Taylor's fee a set percentage or are they deciding which company to award based on the fee offered by each supplier? A: Taylor s fee is a flat fee of $.0035 per kwh for all auctions. The fee does not change based on the price of electricity or the supplier that wins the auction. All participants in the auction pay the same price and Taylor s fee is imbedded in the cost from the winning supplier [Stephen Rumpler]. Q: Is the power mix you buy for the Boston project greener than it was before the 2
project? How much did the mix improve? A: Prior to 2009, Boston power did not have a minimum green component but local utilities did purchase some green power as part of their mix. State law now requires that a minimum of 7 percent of all power be green. Boston Buying Power exceeds this minimum with a 10 percent purchase of green power [Stephen Rumpler]. Questions addressed to James Sloss of Western Pennsylvania Energy Consortium, Pittsburgh, PA: Q: I don't understand the price point Pittsburgh was working towards that triggered the auction. Can you explain that again? A: As a group we established a number that when the price of electricity hit this point we would proceed with the reverse auction [James Sloss]. Q: Are we talking about green power in this auction or brown power? A: The purchased power is 90 percent brown and 10 percent green. Now we are doing 85 percent/15 percent [James Sloss]. Q: What is the upfront cost for the software used by the Western Pennsylvania Consortium? A: There was no upfront cost [James Sloss]. Q: How were organizations pre-qualified to bid? A: They had to meet the terms and conditions established by the group. Like I said in the lecture this was the hardest part of the program [James Sloss]. Q: Reverse bid? Lowest price wins? Yes [James Sloss]. Q: Does the winner of your auction read your meters now, or how is the actual use reconciled with the purchase? No, it s still handled through Duquesne Light, our local service provider [James Sloss]. 3
General Questions: Q: Do you have to be a licensed electricity aggregator to do this on behalf of a group of purchasers? Like the Maine Example? A: The City of Boston required that any one submitting a proposal or response to the RFR had to be a licensed broker in Massachusetts. Taylor Consulting meets this requirement in the State of Massachusetts and is licensed in many other states as well [Stephen Rumpler]. A: No [James Sloss]. Q: Can you participate in energy aggregation in a regulated power market? A: No, only deregulated markets are open to competitions. Each state is different so you need to check with your individual state to determine if competition is allowed and if not when will it be allowed [Stephen Rumpler]. A: No [James Sloss]. Q: How do you verify that your suppliers are meeting your minimal renewable percentages? A: RECs certify the amount of green energy purchased. Every customer gets a copy of the REC for their own records [Stephen Rumpler]. A: We have a contract. If they are not making the purchases then that would be theft [James Sloss]. Q: Any suggestions for much smaller municipalities? We have 945 people, one building, one major road, 350 homes. We could collaborate with neighboring municipalities. Any other thoughts? A: If there are other aggregations in the area you could join in with other groups, as most groups are generally inclusionary and not exclusionary [Stephen Rumpler]. A: Reach out to the county. They may be establishing a program that could benefit all municipalities [James Sloss]. Q: Do these cities own their power companies? A: No, in Massachusetts we have 4 major publically traded utilities: NSTAR; NATIONAL GRID; UNITIL; and, WESTERN MASSACHUSETTS ELECTRIC. There are several municipal owned utilities in Massachusetts and they are not deregulated and most likely own their own power plants [Stephen Rumpler]. 4
A: No [James Sloss]. Q: What reverse auctions were used in this process? A: In the City of Boston, Taylor Consulting uses its own reverse auction platform called Energy Auctions [Stephen Rumpler]. A: We used Co-Exprise [James Sloss]. Q: What would be the difference between forming a public utility district vs. a buying group? Couldn't the PUD similarly do what Pittsburgh/Boston is discussing? A: Forming your own utility district would likely require a change in state law and would require the approval of the local utility company that operates in your town. Public Utility Departments or Commissions are formed to regulate rates for all utilities including natural gas, cable television and phone. They are not in the purchasing or group purchasing business [Stephen Rumpler]. A: Yes [James Sloss]. Q: Was there difficulty in having businesses agree to any "green power" purchase requirements? A: Yes, some businesses want a larger percentage of green power and some want less if it means a lower price. For those asking for a larger percentage, they can be priced on their own but they will lose the benefit of the group purchasing power. The same could be said for those looking for less green power. The cost of 100 percent brown power may be a little less but once you move out of the group you will likely pay more since you are not part of the large buying group. If the demand is large enough for more green power it is easy enough to move the group in that direction but a lot will depend on the cost of the RECs [Stephen Rumpler]. Q: So the Pennsylvania and Massachusetts examples are actually purchasing power, not RECs? A: The RECs are part of the purchase. The actual power that is consumed at each facility is not the power that is purchased on the facilities behalf. Electricity is a homogeneous product with no ability to distinguish one brand of power over another [Stephen Rumpler]. A: Yes. The group is purchasing a bundled product [James Sloss]. Q: Is this for the both the supply and delivery sides of electrical demand? A: This is only for supply. Local utility is still the responsible party for delivering power to the business [Stephen Rumpler]. 5
A: No, just supply [James Sloss]. Q: Does winning supplier have a separate contract with each buying group entity? Did all entities participating have the same date of supplier contract to start? A: Yes, the winning supplier has a separate contract with every customer that is part of the buying group. The start date for each participant matches up with their actual meter read date so not all customers in the group will start on the same day but they will start in the same month [Stephen Rumpler]. A: Yes and yes [James Sloss]. Q: The electric utility rate for our institution is very inexpensive and therefore the financial case is difficult to make. Please give examples of how marketing/branding have rewarded your organizations as mentioned in the Introduction. A: Regardless of how big or small a business is the savings that may be generated is the same. A 5 percent savings or a 10 percent savings is the same for all that are in the program. Total dollars will vary as someone that spends $100,000 and realizes a 10 percent savings will save more dollars than someone that spends $10,000 and realizes the same 10 percent. At the City of Boston, we brand the program as a benefit for anyone that participates in the program. City does not distinguish between big business and small business and in many cases the Mayor wants to do more for the little businesses, as they need the most help. After all, there are a lot more small businesses in the city than there are large ones [Stephen Rumpler]. Q: How small can a residential pool be to achieve any of the price advantages demonstrated in Boston and Pittsburgh? A: In Boston, we have had auctions as little as a couple of million kwh to as much as 20-30 million kwh. Price advantage compared to utility rates is dependent on two things, size of the pool and the market conditions at the time the auction is run. Both of these will have an impact on overall cost to pool participants [Stephen Rumpler]. A: I would want the group to be a minimum of 20 million kwh per year [James Sloss]. Q: Could you describe in detail how to hold a Reverse Energy Purchase Auction. What is the procedure? How do you set that up? A: In the case of Boston, our program administrator, Taylor Consulting runs the auction. The city does not have to do anything [Stephen Rumpler]. A: We hired a company to handle all of the details of the auction. If you would like more detail please contact Co-Exprise at 724-933-1180 [James Sloss]. 6
Q: How does the local electric utility recover the cost of transmission and it seems like residential customers within a municipal jurisdiction will tend to shoulder the higher cost of non-aggregated power sales? A: Local utility companies have regulated rates for delivery and transmission. They continue to bill customers directly for this service. Only the power generation is subject to competition and the auction program [Stephen Rumpler]. A: Those fees are still there and are detailed in the invoice [James Sloss]. Q: What are the opportunities for aggregating purchases of green power in a nonderegulated environment, where there may not be the opportunity to bid out for green power suppliers? Are bidding for RECs about the only option to make an aggregation an advantage over purchasing green power directly from a utility's green power program at the utility's set premium (or I suppose aggregating purchase of on-site green power generation)? A: Anyone can purchase green power RECs including businesses located behind regulated utilities. The advantage remains with the image you are trying to project in relation to how you conduct your own business. You would need to find a company willing to sell the RECs even if they cannot provide the power. In many cases local utilities offer programs that you can join in order to purchase green power. Best advice is to check with you local utility to see if they offer such a program [Stephen Rumpler]. A: I would think bidding for RECs would be the only option [James Sloss]. Q: Is there a minimum size buying group? i.e. is this worthwhile for smaller municipalities that won't have as much staff, legal, etc.? A: There really is no minimum but everyone must decided how much time and effort they want to put into such a program and what is the benefit of doing so. If you are really small do you have neighboring towns or cities you can join in order to increase the size of the buying group [Stephen Rumpler]? A: Yes if you can get enough municipalities together and build up the yearly usage [James Sloss]. Q: As part of an overall energy conservation and efficiency, how does the reduction of energy costs affect those efforts? It seems it would increase payback time? A: Anything you can do to reduce consumption will help bring about lower operating costs and quicker paybacks on energy efficiency programs. Lower energy costs would actually increase the time associated with payback but this can be misleading. As an example, if you are paying $.10 for power, your savings will be equal to the reduction in energy times $.10 while if you are paying $.08 for energy then the reduction in energy times $.08 would be your savings. The lower prices yields $.02 less in savings per unit of 7
energy consumed. However, prices are volatile and change every year so this years lower cost may be next years higher cost so energy efficiency projects should be looked at in relation to the long term savings opportunities and overall benefits of consuming less energy [Stephen Rumpler]. A: That is correct. We are able to get a lot more done while having more funds available to us [James Sloss]. Q: What specifications are made in regards to the green power? Is there some way that the green power is being verified? A: Yes, all green power is verified with the supplier and customer will get a copy of the certificate. Certificates are produced from the source of the green power and not the supplier that wins the auction. Specifications on green power are up to the pool and its participants. Wind is the easiest and least expensive option but solar, hydro, and other renewables are also options [Stephen Rumpler]. A: We have a contract for purchasing our green power. No, there is no way to get out there and verify that it s green power [James Sloss]. Q: Is energy aggregation limited to certain states? A: Yes, only those states that are open to competition through deregulation [Stephen Rumpler]. A: Yes, just states that have deregulated utilities [James Sloss]. Q: Do you see this applicable to State and County governments? A: Yes, both State and County governments can and do benefit from energy auction and aggregation programs [Stephen Rumpler]. A: Yes [James Sloss]. Q: What other energy buying groups buy green power? A: I am sure there are many other buying groups that buy Green Power but you would need to check in your local area to find out specifically which groups are out there [Stephen Rumpler]. A: The Pittsburgh group purchases Electricity and Natural Gas. I believe D.C. does this too [James Sloss]. A: Another buying group is the Montgomery County Wind Buyers Group. You can learn more at: www.epa.gov/greenpower/partners/partners/montgomerycountywindbuyersgroup.htm 8
[EPA]. 9