Electricity Contract To Save Residents Money

Electricity Contract To Save Residents Money

Mar. 10

Cincinnati Renews Electricity Contract To Save Residents Money

Cincinnati Negotiates Better Electricity Prices For Customers

The City of Cincinnati again has selected First Energy Solutions (FES) as the City's electricity provider through an aggregation process in which the City represents all eligible individual customers as one larger buying unit to negotiate a lower price on electricity.

The City will negotiate a contract with FES for conventional electricity for the next three years, beginning with the June billing cycle.

This selection will save the average eligible household about $49.21 or 8% on electric bills per year compared to the Duke standard service offer (“SSO”). Approximately 65,000 households and small businesses are eligible to participate in aggregation.

There were two proposals submitted for the supply of electricity; each supplier was relatively similar in its ability to fulfill the application requirements, the completeness of its response, and its experience in the aggregation market.

Therefore, savings for households and small businesses and value of the product(s) offered became the primary decision factors.

"This program, begun through Council initiative in 2012, helps the average household in the City save money, but also provides a way for the City to help them become greener at the same time," said Scott Stiles, interim City Manager.

Consistent with the approved Council motion of Feb. 12, 2014 (see below), the City will implement energy efficiency and/or renewable energy improvements as part of this program. The energy improvement programs, funded by a small green energy fee of $.0006 added to the electric bill, will help households and small businesses achieve direct local impact in reducing the amount of electricity used by local residents, and garnering additional savings for local residents on their electric bills.

Further, these improvements will continue beyond the length of the contract, providing long-lasting effects in the community.

The City received a proposal from Empower Cincinnati that offered to complement the responses from the suppliers by providing various green initiatives, including energy efficiency lending, local renewable energy development, and public marketing. The City will consider Empower Cincinnati's proposal in deciding how to best use the revenues from the green energy fee to accomplish the policy goals set forth by Council.

The Request for Proposals issued by the City asked for options for 100% green electricity. The City chose a 100% green supply of electricity in its current contract with FES. City of Cincinnati aggregation customers currently enjoy 23% off the Duke SSO.

However, due to unfavorable conditions in the electricity market, the guaranteed savings percentage available to City households and small businesses has been reduced significantly from 23% to 8% off the Duke SSO.

The option to continue the current practice of providing 100% green electricity would have added 1% to the price, making the savings only 7%.

"Because of this reduction in available savings, and especially because of the challenges many households are having making ends meet, I chose to go with the conventional energy supply for this period," said Stiles.

Next Steps For Households & Small-Business Electricity Users

The City’s electric aggregation program is an "opt-out" program, which means that eligible customers are notified by FES, and must decline if they do not want to participate. If they do nothing upon notification, they will be included in the aggregate customer base, and realize the savings the City has negotiated on their behalf.

Even though FES will remain our supplier, they must still send out the opt-out notices to all eligible customers, including current aggregation customers. This opt-out notice will be sent to eligible customers at the end of March.

If customers do choose to "opt-out," they may choose another competing supplier.

If a customer currently has a contract with another electricity supplier, they may not be eligible to participate in the City’s aggregation program. There is no cost for enrollment in the program with FES for eligible customers.

The Administration will be working with FES in directly contacting eligible households and small businesses about the City’s aggregation decision.

Not every household or business in the City is eligible to participate in the aggregation program. Households must be current in their payments to their current natural gas provider, and may not be Percentage of Income Payment Plan (PIPP) customers.

Generally, residential customers who are not currently under contract with another competitive supplier and small commercial customers that consume less than 700,000 kWh per year at a single location are eligible to participate on an opt-out basis.

Aggregation Proposals

The City issued a Request for Proposals (RFP) and received two responsive proposals. The chart below summarizes each proposer’s original offer in terms of guaranteed percentage of savings off of the Duke SSO, price per kWh, and annual savings per household.

36 Month Conventional Power
Proposer % off SSO $/kWh Savings per year for average household With $.0006 (green energy fee)
Constellation Not offered $0.05591 $42.45 $36.75
FES 9% $0.0547 $54.79 $49.21 (8%)
36 Month 100% E-Green Product (Higher quality)
Constellation n/a[1] n/a n/a n/a
FES 6% (see %) $38.05 $32.30 (5%)
36 Month 100% Green Product (current)
Constellation n/a n/a n/a n/a
FES 8% (see %) $49.21 $43.58 (7%)

[1] Constellation did not provide pricing for a green product.

Green initiatives

In a motion dated February 12, 2014 (Doc. No. 201400198), Council asked the Administration to include various environmental criteria in the RFP, summarized as follows:

  1. Describe how the supplier would increase local employment, economic activity, energy efficiency and the amount of local renewable energy generated within the City.
  2. Identify a revenue stream for purposes of helping finance low-interest loans to residential and/or commercial property owners to make energy efficiency retrofits.
  3. Disclose the amount of CO2, SO2, NOx and nuclear waste generated per megawatt hour for the energy they propose to deliver to Cincinnati, and weigh suppliers that have portfolios with smaller CO2 footprints and smaller pollution loads more favorably.
  4. In response to these criteria, FES and Constellation both offered a variety of energy efficiency initiatives, including energy audits and Energy Star benchmarking for City-owned buildings. In addition, FES offered green alternative energy options, including the current 100% green electricity under the City’s current contract along with a "premium" green product. (Constellation did not offer a green product). FES also offered grant options (for a lower guaranteed % off of the SSO price) that could be used toward environmental projects[2]. Finally, FES offered to purchase up to 500 of the City’s renewable energy credits (RECs) at 100% of the prevailing Ohio REC market price.

[2] Analysis showed that, on a dollar for dollar basis, the green energy fee is a better value for the city than the grant options offered.

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