METHUEN — Residents and small businesses in the city will initially see slight savings on their monthly electricity costs under the city new power supply program, with the potential for larger savings later this year as energy prices rise during winter months, according to city officials.
Through the Methuen Community Choice Power Supply program, the city has pooled – or aggregated – the electrical consumption of all of residents and businesses who do not choose to opt out in order to obtain lower supply costs, with the intent of helping those consumers save money on their monthly bills.
The Methuen City Council approved the power supply program last year, and through a bid process selected Marlborough-based Colonial Power Group, Inc., as its broker to facilitate purchasing electricity at a lower rate than the National Grid basic service rate. TransCanada Power Marketing Ltd., of Westborough, was then selected through another bid process as the energy supplier.
National Grid will continue to deliver power to customers in the city. The only thing that changes is the company that supplies the electricity – in this case, TransCanada.
“You’re not getting rid of National Grid as your delivery, you’re always going to get your electricity bill from National Grid,” said Orlando Pacheco, Methuen’s energy manager. “What you’re doing is simply entering into this program with the city that buys the electric supply from another party, who’s giving National Grid the energy.”
Through a citywide mailing, residents were given the opportunity to opt out of the program and retain National Grid as their electricity source.
As the broker in the agreement, Colonial Power’s fee is built into the price of the electricity, and is not directly paid by the city, Pacheco said. Pacheco also works with Haverhill on its power supply program, which similarly uses Colonial Power Group as its broker.
Those who fall under the residential basic supply service rate – which also includes small businesses – will see minimal savings during the first few months of the plan, which begins with June meter reads and will appear on July bills. Larger commercial and industrial users, however, will see a slight uptick in cost per kilowatt-hour initially, but will remain locked into that rate so they are not susceptible to price swings, officials said.
Larger savings are expected to come in the winter months, a time when basic service rates have spiked in recent years, according to several officials including William Buckley, the city’s director of economic and community development.
“The first six months are going to be fairly nominal, though we were able to beat the National Grid summer rate,” Buckley said.
He added, “The real savings are going to come in the winter months.”
Through Methuen’s program, the city has taken all of its eligible energy customers – those who receive basic electricity supply service – and pooled them together to use as leverage in negotiating service rates, Pacheco said.
“It allows you to take all of the residential load and bid it in the open market with the idea that using everybody’s buying power as one unit will help reduce the price,” Pacheco said.
Cost of electricity
Under Methuen’s program, those under the residential basic supply service would see a rate of 7.869 cents per kilowatt-hour, a savings from the 8.042 cents per kilowatt-hour that’s the National Grid basic service rate from May 1 to Oct. 31 of this year.
The average Methuen residential customer uses 650 kilowatt-hours of electricity per month. Under the power supply program, that equals a savings of about $1.12 per month per customer, and about $18,590 in overall monthly savings for the city’s 16,532 residential customers, based on information provided by Colonial Power.
Commercial, streetlight, and industrial users will also see the 7.869 cents per kilowatt-hour rate. However, the current rate for commercial and streetlight users from National Grid is 7.542 cents per kilowatt-hour, and the industrial rate is 7.395 cents per kilowatt-hour.
The majority of Methuen’s customers are residents or small businesses, said Mark Cappadona, president of Colonial Power.
While Methuen’s commercial and industrial rates are slightly above National Grid’s, Cappadona said Methuen’s negotiated rate would bring stability to those users, as National Grid’s rates are subject to change every three months and tend to spike in winter months. Residential rates, on the other hand, change every six months.
“In the current marketplace, they are slightly above. But they will see the stability of Methuen’s plan in comparison with the whip-saw rate changes they’re seeing every three months,” Cappadona said.
For instance, the commercial and streetlight basic service rate from Nov. 1, 2015, through April 30 of this year was 12.619 cents per kilowatt-hour through National Grid, according to its website. In that same time period the year prior, it was 15.228 cents per kilowatt-hour.
Methuen’s plan spans two years, but prices would be renegotiated every six months in order to optimize savings, officials said. The 7.869 cents per kilowatt-hour rate is good from June to December.
“It’s a very small portion of that rate segment that is going to be subjected to this rate,” Cappadona said of commercial and industrial customers. “I can only tell you in most of our other communities, those customers stay with the aggregation because they like the stability.”
A statement released by Mayor Stephen Zanni said residents and business owners collectively would save around $900,000 in electricity costs annually through the program. That savings estimate was based on projected winter rates, officials said
In contrast, projected annual savings for customers given the current summer rates would be slightly more than $223,080 annually, Cappadona said.
Residents and businesses are automatically enrolled in the aggregation program but do have the option to opt out of it. An opt-out card was mailed to Methuen ratepayers along with information about the program.
“At the end of the day it’s a massive savings to the residents. But more importantly, they can opt out,” Zanni said. “By staying in over the long haul I think they’re going to not only be able to get a good price, but we were able to get it down to a good price. You have to move very quickly to get that rate.”
Residents will not notice any changes or disruptions in their electricity service, save for the name of the company on the bill. TransCanada will be printed under the “Supplier Services” section of monthly electric bills.
Residents and small business owners will continue to receive one bill from National Grid and send payments to National Grid for processing. National Grid will, in turn, continue its meter reads, maintenance and response to emergencies.