Hampshire Council of Governments nears changes in electricity program
NORTHAMPTON — Faced with a steady increase in energy prices and up against stiff national competition, the Hampshire Council of Governments is on the cusp of a complete restructuring of its power program that over the last seven years has provided discounted electricity to municipal, school districts and other customers.
The restructuring stems from an “unprecedented increase” in electricity rates last winter for clients of the organization’s real-time electricity program and a complicated marketplace that requires a significant investment in technical expertise.
“Historically, the way we have bought power has saved our customers money,” said Todd Ford, executive director of the council. “But what we have been seeing is the margin shrinking, and then last winter we saw it reverse and our customers took a hit. That alerted me and others that it was time to start rethinking what types of products we offer and how we will serve our customers in the future.”
To remain competitive with national electricity suppliers and bring savings to its municipal, schools and other customers, Hampshire Council leaders have determined they need to bring in more technical expertise — risk managers, electricity brokers, data analysts and more — to run and expand its electricity program known as Hampshire Power.
Rather than add to its in-house staff, which goes against the council’s low-overhead business model, officials are preparing to ink a contract with a third-party company to provide most of these technical responsibilities. Based on this scenario, the council would eliminate the position of director of electricity. John P. O’Rourke, hired about a year ago for that position, has already resigned, Ford said.
The council’s Executive Committee is expected to meet at 5:30 p.m. Thursday, at which members plan to discuss the restructuring plan and associated contract. Ford declined to discuss details of the contract until the board’s vote. But he said the transition is primarily being driven by Hampshire Power’s need to compete against large corporations.
More than 100 customers have saved about $2.1 million in electricity costs thanks to Hampshire Power, according to the council. Those include many towns, such as Hadley, Granby and Belchertown, several school districts, businesses and nonprofit organizations.
Hampshire Power currently offers a real-time program, a fixed-rate product program and a solar program.
Most customers, about 85 percent, are on the program’s traditional real-time model, which means buying electrical power on the wholesale market and reselling it. Customers save money through a plan in which power rates are set each hour based on the wholesale price of electricity.
When the program started seven years ago, many communities ended up saving significant money. The savings began to shrink a couple years ago before reversing considerably last winter, which meant real-time customers were paying “exponentially” more for electricity than the default prices utilities offered. Ford attributed the increase to restrictions in the natural gas supply from Canada, where most of New England’s power comes from.
“We did not meet our goal from last year,” Ford said. “Our goal is to always beat the utility price and give our customers savings. We didn’t control any of it because it was driven from other market factors, and we didn’t make any money from it, but our customers were not served well by that increase in price.”
The experts Ford hopes the council hires will help it analyze the market and hopefully reverse that trend.
He is also hopeful the restructuring will lead to customer savings for its fixed-rate customers, which would undergo a significant change.
Under the current model, the council negotiates fixed-price electricity contracts for customers. Such contracts enable customers to lock in rates and plan for future energy costs. In essence, Hampshire Power becomes a broker, pairing customers with power suppliers that typically offer low energy prices.
Under the new structure, Hampshire Power would develop its own fixed-price contract plan to offer customers, essentially becoming a power supplier rather than a broker. This could lead to more money for Hampshire Power, the revenue-producing arm of the council. That money is then invested back in its member communities through either direct giveaways or through programs and services, Ford said.
“We have not shifted from our primary focus, which is to save taxpayer dollars for municipalities and the public entities and to keep all of that money that we spend on electricity local and in our local economy,” he said.
The council also continues to ink solar deals for its solar renewable energy credit program. Through that program, the council becomes a broker that bundles energy credits generated by smaller solar installations on homes and businesses and markets them to power suppliers.
Ford maintains the restructuring is in the best interests of the region and the organization’s customers.
“As the marketplace continues to evolve and get more complicated, we have to be able to evolve and have the expertise to deal with those complications,” he said. “That’s why we’re moving forward in this direction.”