Gas Aggregation 4 Communities

Local Utility:

Duke Energy

Population:

185,000.

Challenge:

Community leaders began natural gas programs in April 2006 with the clear objective of beating the monthly variable rate alternative from the local utility, Duke Energy.

Buying Group Description:

Four communities seeking offers for Residential and Commercial customers.

Resolutions:

• Independent Energy Consultants performed an analysis of the historical monthly gas cost recovery rate (retail rate) from the local utility. We then compared those retail rates to the wholesale gas rates as traded on the New York Mercantile Exchange (NYMEX) for the same months. The difference between the two rates provided insight about the mark-up or retail adder applied by the local utility to recover their costs.
• Independent Energy Consultants demonstrated to our clients how the “NYMEX Plus” offer we had brokered was lower than the historical implied formula derived from knowing the utility’s Gas Cost Recovery Rate.
• Independent Energy Consultants developed a gas hedging model, watched the market trends, and continues to buy some or all of given month’s gas on market dips.
• In this time, our client’s rates have been as low as $4.26/Mcf and often the lowest of any aggregation program in the state of Ohio. Participation in the program remains strong.

• Independent Energy Consultants then solicited a variety of price products in a competitive bid which invited all eligible suppliers. The bids were reviewed and we presented our findings and a recommendation to our clients. Each community selected the same lowest and best bidder.
• Armed with this information, it was decided by our clients that Independent Energy Consultants would use the formula and set monthly variable rates when and how they deemed appropriate. Once a rate is set, IEC notifies its clients within 24 hours.
• As of March 2011, 190 pricing decisions have been made by Independent Energy Consultants. In that time we have set rates lower than Duke Energy in 154 of those months or an impressive 81 percent of the time.