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Community Choice Beats the "Standard Offer" in Massachusetts:

Four Competing Bidders Offer First Electric Choice to Communities

The Cape Light Compact, a municipal-county coalition which fought to establish the Community Choice provision in Massachusetts' 1997 electric restructuring law, announced that it has attracted four power suppliers able to underbid the state's "Standard Offer" who will compete for the contract to provide electricity, natural gas and energy efficiency services to all residents, businesses and government facilities throughout twenty towns on Cape Cod and Martha's Vineyard. Residents and small businesses in the Cape Light Compact towns will be the first and only small consumers yet to enjoy any actual choice of power providers since the state deregulated its electric industry.

To date, Massachusetts power suppliers have offered electric choice only to large commercial and industrial users such as theater chains and nursing homes, or clusters of large users such as business consortia and large non-profit organizations like universities, museums and hospitals. Meanwhile, the remaining majority of consumers have remained captive to "default" service through their old utility, called the "Standard Offer" (in other states the "Power Exchange Rate").

The bidders will compete to supply power to all 180,000 customers in 14 Cape towns and all six Martha's Vineyard towns. "To have choice, you need suppliers eager for your business, and that was lacking until today," said Matthew Patrick, a Falmouth Selectman who helped lead the county-wide organizing effort for Community Choice starting in 1995. "Although we have a lot of work to do before the contracts are signed and we have approval from the state, we should be able to provide residents and small businesses with lower rates due to real competition." Service is expected to begin in September, assuming the compact gets state and local approval.

Consumers who do not wish to participate have 180 days to "opt out" and continue to receive "Standard Offer" power through their old utility like everyone else in the state. The "opt-out" provision, which distinguishes "Community Choice" from "opt-in" municipal aggregation efforts in other states, has proven critical to the viability of communities purchasing energy services collectively. "Opt-out means that this community can attract suppliers because they know the volume is there," said Patrick. "With more suppliers lining up, we can get better terms, not merely for power but for other community goals such as renewable energy and energy efficiency programs." Patrick said the Cape Light Compact's Request for Proposals (RFP) awards points to bidders for strong renewable or "green" energy components.

Cities such as Palm Springs and Philadelphia, which have attempted to aggregate their residents and businesses under "opt-in" state laws, have been crushed by the prohibitively high marketing costs of signing up each individual resident and business. By contrast, the Compact was able to take their electricity needs to market intact while protecting the rights of individual consumers to opt-out if they like. "In their analysis, suppliers recognized that the Cape and Vineyard have an attractive load when all of the individual types of customers are put together," said Compact president Robert Jones. "That has been the recognition of our analysts, as well. It underscores the fact that we get the maximum benefit when we all work together."

The names of the bidders cannot be announced until the final supplier is selected, probably by the end of April. The proposed contract must first be approved by the Compact board, then by all 20 boards of selectmen and the Barnstable Town Council.

Copyright (c) 1999 by the American Local Power Project.