Various energy brokers have come to the city of Delaware in recent years in hopes to aggregate the community’s energy supply. With those efforts sure to continue moving forward, Delaware City Council held discussions with Scioto Energy during a work session on Monday to discuss the pros and cons of community aggregation.
Scioto Energy, a Columbus-based electric brokerage firm, has assisted the city in purchasing its energy since 2014.
“We thought it would be helpful in the context of talking about community electric aggregation and gas aggregation that we at least provide council with a background on how the city, itself, purchases power, what considerations are made when we do that, the background of Scioto Energy, and their perspective on this topic,” City Manager Tom Homan said on Monday.
Greg Bechert, the CEO of Scioto Energy, began the presentation by stating that with his clients, “I’m going to tell you what you need to hear, not what you want to hear.”
Bechert said there is a common misconception about aggregation that bringing everyone in the community together in search of an energy supplier creates considerable leverage and buying power.
“The key thing that people don’t often share, or maybe don’t understand … is that energy is a commodity,” he said. “It’s a traded commodity, just like wheat, corn and soybeans. So, this concept of the more people I have together will get me a better rate couldn’t be further from the truth.”
Bechert said that, ultimately, the only thing happening in city aggregation is negotiating a fee with a broker or supplier on behalf of the program participants. He added that it doesn’t matter how much or how little energy is being used, but when the energy is being used certainly does matter considering the volatility of rates during “on-peak” times as opposed to “off-peak” periods.
Many communities nearby to Delaware, including Orange, Delaware, Genoa, and Harlem townships, are currently in agreement for aggregation programs. Bechert said all programs are around 4.89 cents per kilowatt-hour, while an off-market utility company such as AEP can offer a price of 4.88 cents.
“So, all these residents and these businesses that got swept into this aggregation, that didn’t see the notification to opt out, they got swept in it,” Bechert said. “Now, is it financially detrimental? No, it’s maybe a buck or two. But that spread (between prices) can grow over time. And that’s the risk that you, as council and a city, are taking on on behalf of these customers. I think you need to be cognizant of that, that it could very quickly turn against you.”
While Bechert underlined the risks associated with aggregation programs, he went on to say there is some value in doing so for entities with a goal or objective regarding sustainability and renewables. With aggregation, communities can move “in mass, in step” if that objective has been clearly defined and supported.
In 2014, after being approached by FirstEnergy to aggregate Delaware, city staff opted not to pursue aggregation for several reasons. Among those reasons were the time and resources that would be required to educate the public on what aggregation is, how it would affect them, and the likelihood of residents being confused and displeased when they start receiving bills from a different provider.
The number of alternatives and opportunities for better deals to both the city and its residents was also factored in.
Asked about the natural gas side of aggregation, Bechert said aggregating gas would be “even more of a gamble” in trying to provide value from a savings standpoint, and there is no “green play” available.
Following the presentation from Bechert, Mayor Carolyn Riggle said that in a meeting of mayors prior to the pandemic, there were conversations about aggregation programs. Riggle said she found it “interesting” to see how many cities entered into aggregation programs and how many of those mayors wanted out of them due to price differential.
“If we’re going to do this, we have to understand that we’re doing it for the green side of it; not necessarily to save somebody money,” Riggle said. “If somebody does come to us and they’re upset because we didn’t save money, we have to explain to them why we didn’t. It’s something to think about.”
Riggle went on to say she’s asked Homan to get into contact with cities that wish to leave their aggregation programs and ask them to come before council and discuss their experiences.