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 500 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 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 discernible 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, natural gas and solar 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 from the relationship. Any PowerOptions member that is in good standing is eligible for any supply contract.
Who are the PowerOptions suppliers?
Direct Energy, a $4 billion company and the largest competitive retailer of energy and related services in North America, supplies both the electricity and natural gas programs. Solect partners with PowerOptions for the Small Systems Solar Program.
How do I become a PowerOptions member?
PowerOptions membership is open to all nonprofit and public entities in Massachusetts, Connecticut and Rhode Island. 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 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 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 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, 2019. The current gas contract expires October 31, 2019.
What if I have a power outage?
Your LDC is still responsible for transmission and distribution of your electric power supply, so you should continue to call them for restoration of power, regardless of the electricity supplier.
What are the components of my electric bill?
Your bill consists of two major components: supply service (the actual electricity) and delivery service. PowerOptions contracts and savings apply to the supply portion of your bill. Supply charges can be 30 to 70 percent of total monthly bills, depending on usage. Delivery is comprised of three elements: transmission (moving electricity from generators across the region’s high voltage wires), distribution (delivering electricity from the regional grid across local wires to your meter) and other charges for programs, such as energy efficiency and renewable energy.
What are Massachusetts’ Basic Service rates?
Basic electric supply service is provided by your LDC and is available to customers who have chosen not to execute their own competitive supply contract with another supplier. Basic Service rates are also available to accounts that have been switched from competitive supply back to their LDC. LDCs procure electricity supply for three- or six-month periods and pass on the cost at the market rate. They earn no profit on the sale of electricity. Basic Service for residential and small commercial customers is procured for six-month periods and is fixed for that period. Basic Service for medium and large commercial and industrial customers is priced monthly for three-month periods. Most PowerOptions members fall into this latter category and are, therefore, exposed to a great deal of volatility if they stay on the Basic Service rates.
How can I obtain pricing for my electric accounts?
Members should contact PowerOptions for pricing. In order to provide pricing, we will need your usage data for past periods. This information comes from the LDC, and the member must sign a load data release form so that Direct Energy may obtain your account data from your LDC. Price quotes from Direct Energy are updated daily and valid until 5 p.m. on the day quoted. Please contact Tricia Rush at PowerOptions at 617-428-4260 for pricing information.
How is natural gas priced?
In a retail transaction, the basis and the cost of natural gas are billed by the retail supplier and the local distribution charges are billed by the LDC. Pricing for natural gas is a combination of three separate cost factors:
- Distribution Charge: The local LDC responsible for receiving gas from the interstate pipelines that serve Massachusetts and delivering it through a set of local distribution pipes to a customer’s location. This service is billed directly to the customer as the local distribution charge.
- Supply Charge: Under the PowerOptions contract, the natural gas supply is purchased or priced by the retail supplier using gas commodity prices listed on the New York Mercantile Exchange (NYMEX) on the day the contract is executed. Theoretically, all suppliers purchasing at the same time will get nearly the same prices. NYMEX gas pricing varies greatly throughout the year. A buyer can contract for one month’s supply or for up to four years, depending on the customer’s desire for price certainty.
- Basis: In addition to the supply costs, the retailer must charge for transporting the gas through the pipeline, billing and servicing the client and covering profit and overhead. This charge is generally called “basis” or an “adder.” The terms and conditions of the contract can affect this cost significantly.
How do I know when the NYMEX is low and I should buy?
The NYMEX market moves up or down based on many unpredictable events including weather, natural gas storage levels and changing supply/demand situations. For example, natural gas commodity prices are at or near the lowest levels they have been in the last six to seven years. On the supply side, the surplus of crude oil has taken pressure off of natural gas prices. That said, pipeline constraints into New England have kept the region from enjoying the low prices others around the country are paying.
What is the fuel use charged by the LDC?
A small amount of gas is used to power the local distribution system, and some is lost during the distribution process. An allocation of this gas is added to the amount actually measured at the customer’s meter to determine the amount the supplier needs to deliver to the LDC to service the customer.
What is the “city gate”?
It is the point at which an LDC takes gas from the interstate pipeline. In most retail contracts, the retail supplier’s delivery point is the city gate. The LDC then picks up gas at the city gate and delivers it over its system to the user.
What is a “capacity charge”?
The capacity charge is not directly billed to the retail customer, but it can affect the supplier’s costs. Natural gas takes up physical space in the interstate pipelines and only certain amounts can be transported from one place to another at any one time. A supplier must purchase capacity in the pipeline from the source point of the gas (the well head) to the point where the gas is taken off the pipeline and introduced into the LDC’s distribution system (the “city gate”). When a customer decides to purchase gas from a retail supplier, the LDC is left with previous commitments for capacity to serve that customer which the LDC may no longer need. Under existing rules in Massachusetts, the retail supplier must purchase the capacity the LDC was holding to supply the customer.