Municipal Gas Aggregation

Local Utility:

Dominion East Ohio

Population:

32,000

Challenge:

The Community Administration is a believer in the power of aggregation programs but is reluctant to set rates for residents and wants to be shielded from potential second guessing if the volatile energy markets move against them.

Buying Group Description:

Single community seeking offers for Residential and Commercial customers.

Resolutions:

Independent Energy Consultants issued an RFP suggesting suppliers offer a variety of pricing products including fixed rates, variable rates, price caps, etc. It was also requested that suppliers consider giving residents the ability to choose between various price products.
The winning bidder provided a default variable rate to all that would change each month. The price would be determined using a predetermined formula and changes on the monthly NYMEX settle price of the expiring natural gas contract.
The fixed rate would be determined by taking 12% off the supplier’s standard service offer for the month.
At the mid-way point of the 2-year program 11% of the program participants have selected the fixed rate option. The other 89% of residents and businesses have remained with the monthly variable rate. Both groups have fared well with the monthly variable rate often being less than $5.00/Mcf.

IEC received bids and identified the supplier with the best pricing and the ability to undertake such a complex endeavor.
The offer also allowed residents to contact the supplier and convert the variable rate to a fixed rate at any time. The fixed rate would last for 12-months or until the end of the program, whichever is less.
The program has proven to be a success. The community leaders have received compliments for their innovative thinking and have been shielded from criticism because the decision to choose a variable or fixed rate is now an individual choice.
The supplier has handled the complex program logistics without incident and program participation remains strong.