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Local consumers fleeing standard electric providers
BUCKFIELD -- Buckfield is mulling the abandonment of it's current electricity supplier in favor of a new reseller, a move that highlights a common misunderstanding about Central Maine Power (CMP).
"We are looking at our options to save taxpayer money," said Town Manager Glen Holmes. " I am hoping that at a January meeting, we will be able to make a presentation."
Most people in Maine think that they're buying their electricity from CMP, but that's not exactly true.
In fact, residents are buying their kilowatts from the Maine Public Utilities Commission (MPUC), and paying CMP for the separate service of metering their usage and maintaining the poles and wires of the power grid.
"We don't generate it, we never buy it, never sell it, and never own it," said Carroll. "We do bill for it."
The issue can be confusing, because both separate services are paid at the same time, for the same bill, and to the same company, CMP.
"You still send one check to CMP because they don't want consumers to have to write multiple checks," said CMP representative John Carroll. "But we turn the money right around and pay it to the appropriate company."
Most homeowners and municipalities currently use the "standard offer," a constant rate that is locked in, and which is negotiated every year after the MPUC puts it out to bid.
CMP has no stake in whether a user chooses the standard offer, or to go with a company like Glacial Energy.
"We, by law, are completely indifferent," said Carroll. "Anybody is always free to go out and get a better deal and take it, but they're still customers of ours."
CMP is unaffected by the trend towards resellers, because it gets paid the same amount no matter who the end-users buy their electricity from.
A new market
Holmes reported that he was approached last month by a salesman for a company called Glacial Energy at a municipal conference.
The recently-deregulated landscape, and the colorful characters and companies that have rushed in to occupy it, suggest instablility, and that the final chapter in the story of the market has yet to be written. In 10 years, there may be clear winners and losers in the electricity resale game, but for now, it is too early to tell.
Glacial Energy, an electricity reseller that has exploded across the northeast since being founded in 2005, is aggressively marketing to towns like Buckfield.
The company has both fans and foes, and is run by a reportedly hard-partying Australian entrepreneur named Gary Mole, who was once slapped with a lawsuit for exposing himself during a dinner party (the suit was eventually dismissed).
"I went online, and there are 10 pages of companies that do this. Instead of just taking the first one, I would like authorization to contact at least the companies in Maine, and see what else is out there," said Holmes.
Holmes also noted that the company bills and withdraws from accounts electronically, and so a separate account would have to be established to prevent Glacial from accessing the municipal general account.
A better deal?
Under the standard offer, says Carroll, "typical customers uses about 550 kilowatt hours per month, so a typical bill is about $85. The split is about 40 percent of the bill for CMP." The remaining 60 percent goes to the seller.
From the consumer's perspective, the main difference between the two companies is that Glacial offers a variable rate based on the market prices of the day, while the standard offer is a fixed rate based on the bid of the winning company.
Glacial has wooed Buckfield with an analysis of 18 months of previous electricity usage, during which time Buckfield racked up $10,759 in electricity costs. Glacial claims that Buckfield would have spent only $9,392 during the same period.
"Over the last 18 months, if we would have been a customer of Glacial Energy, we would have saved 13 percent on our electric bill," said Holmes.
That sounds pretty good. However, "it does have some drawbacks," said Holmes. "One of them, of course, is that it can be more expensive if they don't buy smartly."
Buckfield Selectman Robin Buswell says that current electricity prices are at a low.
"We just want to be very careful when we look at this," said Buswell, "because it will turn, and when it turns, it can hurt us."
"Right now the price of electricity is cheap," said Buswell. "Not to the homeowner, but the manufacturing is very cheap. It's supply and demand."
As evidence, Buswell cited a manufacturer in Livermore that usually burns 300 tons of material every day to produce electricity. "Right now they're at 120," he said.
Rather than switch to Glacial, Buckfield is seeking out other cost estimates from other electricity resellers. Holmes said that he planned to talk to others who have made the switch.
A growing trend
If Buckfield makes the switch to Glacial or some other competitor, it will not be alone in having made the decision.
Carroll said that larger towns, like South Portland and Scarborough, are also considering switching to alternative providers.
Generally speaking, the largest electricity consumers in the area have flocked to alternative providers, while individuals have tended to stay with the standard offer.
MPUC data on customer migration shows that, in August of 2010, 96.8 percent of "Large Class" users had chosen competitive electric providers, as compared to 3.4 percent of "Small Class" users.
That 3.4 percent, while tiny, still represents a quickly growing segment of the market. Four years ago, in August of 2006, the number was just .3 percent, indicating an elevenfold increase in just four years.