With energy hike looming, area businesses chase down deals

Third in a series

PPL's rate caps will come off less than two months from today, and commercial customers have been shopping around for the best deal to fit their needs and save on the impending increase, estimated at 30 percent.

Representatives from PPL Electric Utilities are encouraging consumers to shop for an electric generation supplier.

One of the solutions is to form an energy consortium. The Brush Valley Regional Chamber of Commerce did just that through OnDemand Energy Solutions, a consulting service that analyzes a business' energy usage and recommends a supplier.

Director Sandy Winhofer said the chamber joined OnDemand through the Columbia-Montour Chamber of Commerce and the Chamber of Commerce Services Corp. OnDemand is able to aggregate the accounts of businesses, municipalities and school districts to shop around for lower prices from suppliers. The energy pool creates a larger buying power and therefore, lower prices.

"We were researching different energy alternatives and we met with PPL. They informed us about some possible pools out there," Winhofer said.

Since there are mostly small businesses in the region, the consortium seemed like the most beneficial product for the region. Winhofer said chamber board members liked the fact that OnDemand was Pennsylvania-based and that the company has more than 10 years of experience with energy deregulation.

Winhofer said about 30 percent of the chamber's 230 members have expressed interest in joining the consortium.

'Physical' costs

One of those members is Star Physical Therapy and Fitness, Marion Heights. Facing thousands of dollars in increased annual energy costs, and with electricity vital to equipment used daily at its facility, Star had little choice to reduce prices except through joining a consortium, said Megan Swartz, office manager.

She said an informative meeting sponsored by the chamber made the decision to join an easy one. OnDemand's analyzation of Star's electricity bills predicted an increase of $2,500 to $3,000.

"That is a significant increase for our business," Swartz said. "It could be the cost of a new piece of equipment or the cost of advertising."

With OnDemand, Swartz hopes to keep paying about the same for energy usage, despite the rate increase.

OnDemand, because of its Pittsburgh base, has experience in dealing with enery deregulation in western Pennsylvania, where rate caps have already expired in the Duquesne and Penn Power service territories.

Mike Lerch, president of Lightning Rent-to-Own in downtown Shamokin, said finding the right generation supplier can be tedious, and many businesses simply don't have the time to shop for the best deal.

He said he was looking to lessen in the impact of the increase and decided the chamber's consortium was the easiest solution. With eight locations, it was simply too difficult to try to find an energy generation supplier for every location.

Geisinger buying power

Al Neuner, associate vice president of Geisinger Health Systems, described his search for an electric generation supplier during a recent Energizing our Region seminar in Lewisburg, sponsored by SEDA Council of Governments.

In order to mitigate market fluctuations, the company evolved to a system of layered purchases since 1985.

He explained the differences between buying electricity wholesale or on index pricing. Wholesale, which can be forward, fixed or term, is a price that generators quote (for a specific term) for a "block" of power. Generators charge a premium for setting a block price for a specific term, such as 12, 24 or 36 months.

These prices are driven by geopolitical turmoil, oil, long-term weather forecasts, long-term hurricane forecasts, natural gas storage reports, exchange rates and long-term supply and demand forecasts, Neuner said.

Index prices, which can be real-time, day-ahead or spot, are volatile. They are driven by immediate supply and demand.

Geisinger has taken a blended approach to purchasing electricity.

Also, to take advantage of the natural disparity in pricing between on-peak and off-peak pricing, Geisinger has invested in off-peak equipment such as thermal storage, a 1.08 million gallon chilled water storage, off-peak heating and the purchase of an off-peak electric boiler.

"It has always been Geisinger's strategy to use less. This minimizes costs, regardless of the pricing of the energy commodities," Neuner said.

Also in the health-care field, Jessica Trell, director of development and public relations at Shamokin Area Community Hospital, said the hospital is still looking at options for its energy supply. While the hospital is a member of the Brush Valley chamber, it has not yet decided whether or not to join the OnDemand consortium.

'This is a contract'

Ray Murphy, manager of major accounts at PPL Electric Utilities, was at the Lewisburg seminar to explain the importance of shopping around for an electric generation supplier.

Licensed suppliers may have several pricing structures for electricity, such as flat-rate pricing, on- and off-peak rates, real-time pricing, block and index pricing. He recommends a consumer ask a lot of questions about these structures and make sure they fit the business and its needs. All customers can shop for a generation supplier, but those who can benefit most from shopping include businesses with high energy usage, a relatively constant load, most of usage occurs during off-peak hours, and those businesses that can voluntarily curtail the electric load, Murphy said.

Mike DeMarco, of Hemlock Township Municipal Sewer Cooperative in Columbia County, shared his experience in choosing a generation supplier. He said upon creating the cooperative's 2010 budget, he realized it would see a 40 percent increase in energy charges. In having to reduce that cost and find a stable rate, he embarked on a quest to find the right supplier.

After shopping, he was able to decrease the 40 percent increase to 18 percent.

"By not shopping, you are accepting the 10.5 percent cost," he said, referring to PPL's default kilowatt cost. DeMarco encouraged anyone shopping to call several suppliers and ask many questions.

"You must understand that this is a contract," DeMarco said. "You have to do your research and know what you are obligating yourself to."

An updated list of energy suppliers can be found by visiting the Office of Consumer Advocate's electric shopping guide.

Complete these steps before shopping for a supplier:

- Document how much electricity you use and when you use the electricity. This data can be found on your electric bill.

- Identify the major uses of electricity. Or determine where the "energy hogs" are. Easy-to-use electricity usage monitors are available at modest prices.

- Make sure you know the time periods for on- and off-peak electricity. Consider how you could modify the load profile by shifting the use of electricity to off-peak periods.

- Estimate the costs of heating, air conditioning, laundering and water heating.

- Calculate the cost of electricity as a percentage of total production or service costs of your business.

- Consider the costs of any alternative forms of energy, including costs for installation.

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