Carroll energy co-op rejects contract bids

Volatile electricity market hurts search for savings

rates may rise 30 percent


May 17, 2004|By Hanah Cho | Hanah Cho,SUN STAFF

A Carroll County cooperative that pooled $3.5 million to buy electricity has been unable to lock in reasonable energy prices in a highly volatile market as Maryland moves toward deregulation in July.

That means Carroll businesses and municipalities could absorb rate increases as high as 30 percent when local governments' finances are tight.

The 82-member group - which includes Westminster, Sykesville, Manchester and New Windsor - sought bids last week from five energy suppliers. The bids, however, translated into rate increases of more than 30 percent, said Richard Anderson, an energy consultant for the electricity cooperative organized this year by the Carroll County Chamber of Commerce.

As a result, the cooperative has decided to forgo a contract and will wait until the energy market is more stable. The group could solicit bids again as early as September, Anderson said.

"There were quotations that provided savings on selected accounts, but the participants of the cooperative felt as though they would rather wait and see if the market will readjust itself and provide them with a significantly larger savings to all members at a later date," Anderson said.

Chamber President Bonnie J. Grady did not return several telephone calls.

Cooperatives have been forming across the state in an effort to get the lowest energy prices for members through collective buying. In 1999, the Maryland General Assembly approved energy deregulation to open up the industry to competitive pricing.

Rate limits that were set to ease the transition will expire June 30 for commercial customers served by Baltimore Gas and Electric Co. and Potomac Electric Power Co.

Last week, a group of governments in the region, including Carroll County, awarded a $67.3 million energy-supply contract to Houston-based Reliant Energy. The participants are expected to save $3.2 million a year on electricity during a 23-month contract that takes effect in July.

But a cooperative organized by the Baltimore/Washington Corridor Chamber of Commerce had an experience similar to that of the 82-member cooperative.

"We're in the same situation," said Walt Townshend, president of the Baltimore/Washington chamber, which covers Anne Arundel, Howard, Montgomery and Prince George's counties. "This has been the highest the market has been."

The Carroll County and Baltimore/Washington chambers had been telling cooperative members to expect price increases of 6 percent to 18 percent.

But in recent months, the energy market has been explosive, with a 12 percent increase two weeks ago and an additional 15 percent rise last week, Anderson said.

When the Carroll cooperative was soliciting bids, most of the five energy suppliers said they could not offer prices below BGE's "standard offer service" rates - which are for customers who decide not to sign up with a competing electric company.

Small and mid-size businesses in BGE's territory will see standard-offer-service increases of 17 percent to 20 percent, according to the Maryland Public Service Commission. For members of the Carroll cooperative, rate increases could reach 30 percent to 34 percent, Anderson said.

"Everyone is optimistic in the Carroll County cooperative that the market will come back to some form of reality," said Anderson, managing principal at CQI Associates in Columbia. "They are willing to wait."

In the meantime, local officials are bracing for higher rates and making plans to cut back on electricity usage.

Sykesville officials pointed to higher fuel and electricity costs as a reason for proposing a tax increase in the 2004-2005 budget, the first such increase in more than a decade.

The town opted to join the cooperative in hopes of negotiating lower energy rates.

"The market is higher than the default price now," Town Manager Matthew Candland said. "We are looking at a 25 percent increase in costs."

Candland told the Town Council that the group will seek bids again in September.

"The No. 1 cause is fear of the world situation mixed with good old-fashioned greed on the part of suppliers," Candland said.

In Westminster, city budget Director Joseph D. Urban planned for a 22 percent increase in electricity costs for the fiscal year that begins July 1.

The city pays $750,000 to $800,000 annually for gas and electric service, $472,000 of which is for electricity.

Based on the default rates set by BGE for customers who do not choose an alternate supplier, the city may experience a 30 percent to 34 percent increase. To cover the costs not included in the budget, Urban said, Westminster officials will likely dip into the city's savings.

"Our expectation is that the market is not going to decline until September," Urban said. "The summer months are normally the highest-cost months."

At last week's City Council meeting in Westminster, members said they would urge city employees to conserve energy.

"It's not a pretty picture," Councilman Thomas K. Ferguson said.

Sun staff writer Mary Gail Hare contributed to this article.

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