Fred Fastiggi, CEM
Senior Vice President – Energy
Birdsall Services Group
We are constantly getting these inquiries, and the most difficult thing is trying to answer them with facts so that our clients can make a true “apples to apples” comparison. While we always have the facts from our end (they come right off the supplier’s contract), inquiries spurred by competitor pitches usually contain no detail other than a claim that “we can save you more money”.
What is included in the quoted price? – Our price is totally comparable to PSE&G’s price-to-compare (also known as Basic Generation Service or BGS) and includes NJ Sales and Use Tax, as well as charges for generation and transmission capacity , line losses, PJM ancillary service charges and all of the items in PSE&G’s BGS component of their default tariff.
Terms and Conditions? - Finally, the contract we have with our supplier is what is called a “full requirements” contract, which means the suppliers have to supply whatever the municipality needs at the agreed upon pricing. If the municipality takes less than originally specified in the bid document, the supplier still needs to supply that deficiency at the contract price. Same if the municipality takes more, the excess is priced at the contract price. Many competitors who claim to offer lower pricing are not offering full requirements contracts and if usage should vary, you may find you are paying a different price of the variation from your originally anticipated volume.
Our buying group has a team of Municipal Administrators, Lawyers, Energy Consultants and an Executive Director that plan for, and administer, the Electric and Gas cooperative purchasing programs for its members. The buying group ultimately takes its direction on the timing, and contract length from its Board, which is made up exclusively of Municipal Administrators who deal with the same issues other Municipal Administrators deal with on a day in and day out basis. Getting competitive pricing is important to them, as is budgetary certainty. For the case cited above, the Board’s direction was to secure an appropriately aggregated supply (with specific bid packages for similar groups of accounts that will allow for the optimization of their usage) with a competitive price, as well as a flat rate for budgetary certainty, over the twelve month contract period. In other instances they may direct their professionals to secure a floating price, or a “block and index” price where part of the requirement is at a fixed price and another part floats. For natural gas they may direct their professional to lock only the “basis” (a/k/a) the transmission costs from the gulf to the local utility’s City Gate, and to let the commodity portion float. There are an almost infinite number of contract structure possibilities, but what should be specified to the bidders is what satisfies the pricing and functional needs of the users given their risk appetite.
About the Author - Fred Fastiggi is Senior Vice President of Energy Services for the Birdsall Services Group. He has worked in the energy industry for over twenty-five years both for regulated utilities and as a consultant to commercial, industrial and public clients. Fred’s firm is currently the Energy Consultant to the New Jersey Sustainable Energy Joint Meeting (an organization of over one-hundred and ninety New Jersey municipalities and public authorities), the Mid-County Cooperative Pricing System (six NJ counties who have banded together to do cooperative energy purchasing) and numerous individual counties, school districts, colleges, hospitals and other commercial or industrial entities. He holds the designation of Certified Energy Manager and Distributed Generation Certified Professional from the Association of Energy Engineers.