By Jaimie Julia Winters
What’s a government energy aggregation and why is Montclair looking into joining one?
Energy aggregation is when a town or a group of towns go out to bid for its residents as a whole in order to get lower rates and cleaner energy.
The Electric Discount and Energy Competition Act was passed in 1999, deregulating the energy market, and was intended to bring energy choice to New Jersey ratepayers.
Instead of PSE&G giving all customers the same default rate and energy source, the energy deregulation encourages competition by giving customers a choice when it comes to who supplies their natural gas and electricity.
Currently, Montclair households can pick their own energy suppliers and many in town already do in order to get cleaner energy, but it’s usually at a higher rate. So, residents wanting to lower their carbon footprint by choosing wind, solar, hydro or landfill gas usually need the financial means to do so.
But, there’s power in numbers and discounts when buying bulk, said Sustainability Officer Gray Russell, who is spearheading a movement for Montclair to join a government or community energy aggregation.
Instead of each Montclair household acting independently, town governments will act on behalf of its residents and approach selected energy providers to get bids. So Maplewood, South Orange, Milburn, Glen Ridge, Verona and Montclair have joined forces to go out to bid for their nearly 53,000 households, making it one of the largest community energy aggregations in the state. “The towns that join the aggregation have to have ratepayers with similar demographics,” said Russell.
All but Montclair had passed ordinances creating community energy aggregations before Montclair did so on May 22.
Not all are for aggregation. Some towns decided not to pursue an aggregation after residents came out in force against the government negotiating energy rates for residents.
Councilman William Hurlock and Deputy Mayor Robin Schlager voted against the ordinance. Both said they were concerned with rates that go down but then later rise.
Gabel Associates is the consultant that will proceed with going out to bid for the energy aggregate.
Energy consulting firm
Gabel Associates is an energy consulting firm headquartered in Highland Park, registered with the New Jersey Board of Public Utilities since 2000.
Gabel Associates administers some of the largest energy aggregation groups in the State, which include school districts, municipal and county electric and gas accounts, as well as many other private and public sector clients. The municipalities do not pay the firm. It gets paid by the successful bidder and through a nominal service charge on the ratepayer’s bill, said Russell.
Montclair’s 70 government accounts are already part of an aggregation through the Essex-Hudson Regional Cooperative Purchasing System of with 40 towns lowering their energy costs by about 13 percent with 25 percent renewable energy.
What the aggregation wants
Russell said the group is looking for the five percent lower rate and to be at 40 percent renewable energy. Montclair is currently at 17 percent clean energy, he said.
“It’s not going to be huge amount for the ratepayer, about $100 a year on average. But saving $1 million for Montclair overall, while lowering our carbon footprint substantially,” said Russell.
The New Jersey Division of Rate Counsel and the New Jersey Board of Public Utilities reviews the contract ensuring that what is claimed to be renewable is clean energy.
There are a few things that could affect the bid numbers however, said Jesse Castellanos of Gabel Associates. All but 15 of about 8,000 ratepayers in Milburn are with Jersey City Power and Light (JCP&L). Although the rates for PSE&G are uniform across the territory, the rates could differ from PSE&G and JCP&L. In addition, in June the energy companies will lower rates across the board as tariffs are going down, Castellanos said.
Federal regulations require that an aggregation program show savings versus the utility provided rates at the time of the bid.
“In New Jersey, if the switch is to more renewable energy, the program doesn’t have to necessarily save money. But we are looking to get savings,” said Castellanos.
If the rates are not lowered, the group can reject the bids and will try again at a later date, Russell said.
Livingston just rejected bids that came back with no savings.
How it works
The contract between the group and the energy supplier, which could be for one to two years, would allow for a non-variable rate for the entire term. The rates could go up with an increase in transmission rates, but must be approved by the State Board of Public Utilities, said Castellanos.
If a third-party supplier is retained, residents are automatically enrolled in the aggregation.
Each resident will receive a written notification after the group’s approval of a bid informing them of the price, the comparison to the utility price and their right to opt-out. After a number of years, it was recognized that an “opt in” approach put such a burden on the programs that none got off the ground, and the model was changed to “opt-out” only for residential customers.
Households currently with a third-party energy provider will not be enrolled. They can wait for their contract to end and then enroll, or break their current contract, which could entail fees.
Solar households will not be enrolled.
PSE&G and JCP&L will still provide services and residents will still receive their bills through them. In the case of a power outage, PSE&G or JCP&L will still be the utility to notify and will respond to repair lines and service. Any resident enrolled in equal payment plans can continue to do so.
Each town still has to pass a resolution to join the other towns to form the aggregation. Going out for bids could happen in late fall or early winter, said Castellanos.