A breakthrough for big energy users at hand

A collaborative of 33 electricity customers in the New Bedford and Fall River areas – mostly large manufacturers – should save more than $10 million in electricity costs over the next three years by getting power from a non-regulated supplier.

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Select Energy Inc. of Berlin, Conn., a subsidiary of Northeast Utilities, was awarded the contract earlier this month by the South Coast Electric Power Group, which includes industrial customers, hospitals and municipalities. The New Bedford and Fall River chambers of commerce helped facilitate the deal.

“Essentially we are buying a very large block of power, which gave us the buying power to get an attractive rate,” said Chris Bale, vice president and general manager of Revere Copper Products in New Bedford, a member of the collaborative and manufacturer of copper and copper alloys.

Some of the companies in the group already have tested the retail waters since the Massachusetts market was deregulated three years ago. But most of the group’s members are leaving their local electric company for the first time.

“This is new stuff for most of these people,” Bale said.

Revere was one company that already did contract with an energy retailer, Select Energy, three years ago. Although the rate Revere got with the recent contract wasn’t quite as low as the last one – because electricity costs have gone up – the manufacturer still will save more than $400,000 over three years by using a non-regulated supplier rather than its local distribution company, NStar.

Revere will pay less than 5 cents per kilowatt-hour under the new contract, vs. NStar’s standard rate of 6.3 cents, Bale said.

In Rhode Island, a handful of manufacturers and other big electricity customers have been able to beat Narragansett Electric’s standard rate by entering long-term contracts with retailers. But competition in Rhode Island’s electricity market has been slow to materialize, primarily because Narragansett Electric’s rate is relatively low.

“In Rhode Island, you still have the issue of a low Standard Offer that’s going to be in place for a considerable length of time,” said Select Energy spokesman Joel Weinberg.

Narragansett Electric’s official standard offer rate is 3.8 cents, although adjustments for the higher cost of natural gas – used to generate much of the region’s power – has pushed the rate higher over the past 18 months. It now stands at 5.5 cents.

Select Energy actually signed 33 separate contracts with different rates based on the electricity consumption of each member. Like most of the group, Revere Copper has what is considered a “high load factor”: it uses a lot of electricity even during off-peak hours like nights and weekends. Electricity costs account for about nine percent of its overall operating expenses, Bale said.

Select Energy officials said the aggregation of so many large electricity customers provided the critical mass needed to cement the deal. And with the cooperation of the chambers and the local utilities, Massachusetts Electric and NStar, Select Energy was able to peg an accurate rate for each group member, based on past electric bills.

“We didn’t have to do any guess work and we knew up front which customers were committed to be in the group,” said Jim Prestiano, a manager at Select Energy who helped broker the contract. “Knowing we’ve got that load locked in makes it a lot easier for us to go out and purchase it.”

Select Energy, which expects to reap $60 million in revenues from the contract, buys, sells and trades electricity, natural gas and other commodities. Members of the collaborative will pay Select Energy for generation of their electricity, but still will pay their local distributor to deliver the power.

The chambers became involved in the process because of members’ gripes over rising electricity costs, according to New Bedford Chamber General Manager Lisa Sughrue. She said the savings ultimately will allow members to budget better and be more competitive.

“It’s nice to be able to lock in a rate for three years so (members) know what their costs are going to be for the next three years,” Sughrue said. “And there will be substantial savings, which will allow them to be more competitive when they go out to bid for their own business.”

The municipalities of Fall River and New Bedford are part of the collaborative. The contract will give the cities a lower electricity rate for all their facilities, including schools, street lights and water-treatment facilities.

Mike Colias can be reached via e-mail at colias@pbn.com