FAQs

Frequently Asked Questions about the PowerOptions® Program

What is PowerOptions®?
PowerOptions® is the energy buying consortium created in 1996 by the Massachusetts Health and Education Facilities Authority (HEFA). By consolidating the gas and electricity energy buying power of Massachusetts nonprofits, as well as state and municipal facilities, PowerOptions® is one of the largest consortiums of its kind. PowerOptions® brings budget certainty, financial protection and advocacy for nonprofits in the complex and often volatile energy markets.

Why was PowerOptions® established?
When the electric and natural gas industries were deregulated, PowerOptions® was formed to help nonprofits consolidate their energy buying influence. As a result, PowerOptions® was the first energy consortium of its kind, and quickly grew into the largest and most influential energy solutions partner in Massachusetts. With over 550 members throughout the Commonwealth spending more than $200 million annually on their energy commodity, PowerOptions® has the leverage to negotiate—which means better terms and conditions as well as greater savings for its members. From its inception, its mission was founded on one simple premise—to bring energy predictability, dependability and cost savings to nonprofits.

How is PowerOptions® funded?
PowerOptions is funded through a combination of membership fees and payments from the suppliers. The suppliers support PowerOptions’ costs of negotiating, managing and marketing these contracts through a fixed annual administrative fee and an additional fee payable on member usage after reaching a certain annual threshold. Unlike typical broker or referral fees, the payments are not based on individual transactions so this cost to the supplier is not added on to the individual price quotes to members. This distinction is very important as it reinforces the objectivity of PowerOptions’ staff and consultants in providing advice to members about their decisions regarding our program. Further, this cost is substantially less than what the suppliers would have to spend on marketing and an increased sales force but for the relationship with PowerOptions, so the cost is not discernable in their price quotes.

In addition to covering PowerOptions expense in administering the program, these funds cover the cost of developing new products and services for our members such as the demand response program as well as advocacy in regulatory matters and regional forums.

How does PowerOptions® work with Suppliers?
Through PowerOptions®’ deep partnerships and pre-negotiated master agreements with energy suppliers it is able to provide members with access to electricity and natural gas supply at favorable prices and favorable contract terms. However, it is important to note that PowerOptions® does not take title to the energy or sell energy. Rather, our members enter a bilateral contract directly with energy suppliers and the terms of that contract have already been negotiated. Once entered into this agreement, suppliers can’t alter these terms and must make them available to any PowerOptions® member regardless of their size. Through the agreement, suppliers agree that PowerOptions® will have the right to monitor their performance under the contract, and where appropriate, pursue members' best interests in issues arising out of the relationship. Any PowerOptions® member that is in good standing is eligible for any supply contract.

Who are the PowerOptions® Suppliers?
The PowerOptions® electric supply contract is with Direct Energy, a $4 billion company and the largest competitive retailer of energy and related services in North America, providing electricity and natural gas to nearly 50,000 businesses in this region.

The PowerOptions® natural gas contract is with Hess Corporation, a global energy company with extensive retail marketing facilities servicing thousands of customers throughout the northeast. Hess has annual revenues of roughly $41 billion.

How do I become a PowerOptions®Member?
PowerOptions® membership is open to all nonprofit and public entities in Massachusetts. Members pay an annual fee based on the size of the institution's annual electric and gas bills, and sign a release enabling PowerOptions® to obtain usage information directly from the utility companies. Participation in energy supply programs is voluntary and non-obligatory. Click here to find out about Click here to find out how to become a member.

Is the PowerOptions® price the lowest available?  
The PowerOptions® contracts offer some of the most competitive prices in the industry, coupled with very strong financial guarantees. When comparing bids, potential customers should carefully review the contract terms and conditions being offered by various suppliers. The PowerOptions® contract provides full, firm supply, the proven financial performance of Direct Energy and Hess, and beneficial terms surrounding permissible changes due to regulatory change or certain unavoidable circumstances interfering with delivery. Many contracts are not as favorably negotiated and may significantly shift certain volume and price risks to their customers.

What savings can be expected by signing up for the PowerOptions® contracts?
Over the last 11 years, PowerOptions® members have saved over $300 million in avoided electricity and gas supply costs.  These savings are as compared to the default or basic service prices of the Local Distribution Companies (LDC). Savings depend on the usage characteristics of the member and market conditions at the time of contracting, but generally, the PowerOptions® prices are below the LDC prices at the time of contracting. It is important to understand, however, that the LDC prices are short term market rates and at times during the term of the contract, the LDC may be below the PowerOptions® program price. However, over the course of our member contracts, many of our members enjoy the combination of predictability and savings in their rates, when compared to the unpredictable nature of the LDC pricing, which can vary greatly due to market conditions.

Both the electric and gas contracts offer members options for pricing that can improve on the benefits depending on the member’s usage and willingness to take on market risks. Greater pricing flexibility allows the member to take advantage of price drops in the market or hedge risks associated with fixed prices over the life of the contract.

What is a Local Distribution Company?
A Local Distribution Company (LDC) is the regulated utility company that is responsible for delivery of electricity or natural gas and customer service related to delivery.  The LDC is responsible for metering, billing and maintaining the delivery system. The electric LDCs maintain the transmission and distribution system to assure the continued flow of electricity to consumers, regardless of who supplies the electricity.  LDCs are what you commonly think of as your electric company – NStar, National Grid, Northeast Utilities (Western Mass Electric Co.), and Unitil (Fitchburg Gas &Electric). Some of the gas LDCs are National Grid (formerly Keyspan), NStar Gas, Baystate Gas, Berkshire Gas, etc. The rates your LDC charges are regulated by the Massachusetts Department of Public Utilities.

Who will read my meter?
Regardless of who supplies the electricity or gas, meters will continue to be read by your LDC.

How will I get billed?
PowerOptions® members may elect to be either billed directly from the supplier or have their supply costs included in their bill from the LDC. Members that have elected to have the supplier’s charges included on their bills issued by the LDC should contact the LDC for questions concerning bills. The LDC is responsible for forwarding to the supplier the amounts you pay for the supply portion, although rules established by regulators dictate the order in which receipts are handled. It is essential that members pay their bills on time and in full to avoid complications in the LDC's handling of funds destined for the supplier.

Billing issues do arise and require a coordinated effort between the member, the LDC and the supplier. The PowerOptions® staff is ready to help any member who is having difficulty clarifying a billing situation.

When can I enroll in the contract and when does it end?
Members in good standing can enroll in our contracts at any time.  Members may obtain pricing for periods as short as three months or for periods all the way through to the end of the contracts.  The current electric contract expires May 31, 2015. The current gas contract expires October 31, 2015.