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Electricity co-op helps businesses

October 01, 2006|by CANDICE BOSELY

WASHINGTON COUNTY - Once upon a time, getting electricity was as simple as calling the number in the phone book, providing a street address and switching on the lights.

No longer is that the case.

When Maryland decided to deregulate energy and open the market to competition, it meant businesses faced the prospect of dramatically increased electricity bills.

For a small-business owner who not only is overseeing his or her business but also taking out the trash and writing paychecks, understanding deregulation became crucial.

But sometimes, it can be difficult.

Eleven companies actively are providing electrical service to commercial customers in Washington County, but sometimes they will not return phone calls to smaller businesses, said Brien Poffenberger, president of the Hagerstown-Washington County Chamber of Commerce, and Richard Anderson, a principal with Columbia, Md.-based CQI Associates.

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To try to help small-business owners cope, the Chamber of Commerce created an "Electricity Buying Co-Operative."

Rates on average went up 42 percent the last time calculations were done in June, said Anderson, who is a consultant working with the Chamber of Commerce on the co-op program.

"It's a significant percentage of your expense structure," Poffenberger said. "It is getting increasingly painful."

A 40 percent increase might determine whether a business makes a profit or not.

"This is the difference between one being in business and one not being able to be in business," Poffenberger said.

A good value

Geared toward small- to medium-sized businesses, the co-op entails businesses signing up for the program. Anderson shops around to find the best rate, and business owners then have the option of signing a contract.

Advantages, Poffenberger said, include reducing the burden on small-business owners to shop the market themselves, as well as having a vetted contract the consultant and others have reviewed.

The contract locks participants into the same rate for three years, which is a good value if market rates continue to increase, Poffenberger said.

The Chamber is accepting applications for a third round of the program.

Thirteen businesses signed up to take part in the first round, and about 25 signed up to participate in the second round.

"I would like to see more," Poffenberger said. "It takes a lot to understand that you're getting a good deal."

A good deal, in this case, does not mean a magic answer.

"I always frame it as, you're not going to save money on electricity," he said. "The best you can hope for is to manage the increase."

The co-op is not available to businesses within the city of Hagerstown, or within the towns of Williamsport, Thurmont, Md., or Front Royal, Va. Those communities already banded together to buy electricity as a group, Poffenberger said.

'Cause for concern'

One of the first business owners to sign up for the co-op was Ron Vitkun, owner of Yogi Bear's Jellystone Park outside of Williamsport.

Vitkun paid $66,000 for electricity in 2005, then received a letter from Allegheny Energy informing him to anticipate a rate increase of more than 50 percent. He said he only had planned for a rate increase of about 30 percent.

"That was one of the reasons we got involved in the co-op," Vitkun said. "That was cause for concern."

Vitkun and his wife, Vicki, co-owner of the campground, signed a contract via the co-op in the spring. The contract means his rate will be locked in for three years, allowing him to better prepare his annual budget.

"Peace of mind," he said, was his biggest reason for taking part in the co-op.

The camp uses electricity to power air conditioners, refrigerators and other devices in its 41 cabins, as well as provide power to another 184 RV sites. It also has a small store, and an office with computers and other office equipment.

This year, the resort opened a water park that has two pools, and two 400-foot water slides. The slides alone require 30-horsepower motors to pump water up them, Vitkun said.

"You turn those things on, and you can look at the meter, that thing that spins, and it's just flying," he said.

How deregulation worked

The deregulation situation for now applies only to commercial customers in Maryland, not residential customers. For Allegheny Energy residential customers, the current rate caps are set to expire on Dec. 31, 2008, and new market-driven rates will take effect Jan. 1, 2009, according to the Public Service Commission's Web site.

West Virginia has delayed making a decision on possible deregulation, while Pennsylvania already deregulated and switched to market rates in 2002, Anderson said.

Essentially, energy deregulation worked like this: When the legislature's deregulation bill went into effect in 2000, prices suddenly increased.

Intermediary steps were implemented to try to reduce the burden on businesses, but those intermediary steps ceased in Washington County on Jan. 1, 2005, when rates switched from artificially capped transition rates to market-based rates.

In other words - on Dec. 31, 2004, there was one electricity provider in the county: Allegheny Energy.

Now, 11 companies are providing electrical service to commercial customers in Washington County. The number of providers can vary from county to county, said Anderson, whose company has helped 22 Chambers of Commerce in the mid-Atlantic region cope with electricity increases.

Those 11 providers are supplying the actual electrons to business owners. Allegheny Energy still provides for all customers the wires, maintenance, billing and customer service.

"The only thing you can choose is who gives you the actual power," Anderson said.

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