What Happened?
Residents and small business owners of Urbana, Illinois, recently saved more than $500,000 over three months after launching an energy aggregation program. Through the project, city officials negotiated electric rates for residents and business owners, working to reduce energy costs through bulk bargaining and purchasing power.
Who Saves?
The average Urbana electric customer saved roughly $15.14 monthly from July to September as a result of the aggregation program. The 10,000 to 12,000 residents and small business owners throughout the city enjoyed a $502,451 reduction in electricity costs after the local government negotiated a rate with the energy supplier at 4.05 cents per kilowatt hour, down from 6.16 cents.
The Aggregation Trend
Many cities across the country are looking to launch similar programs to the one in Urbana, which was approved by local voters in a referendum. The city works with electricity providers behind the scenes to negotiate a lower rate for residents without changing the role of providers or customers.
Many states have established organizations that work to help local governments deploy municipal aggregation programs in their communities. These groups provide energy expertise and industry experience to guide lawmakers on how best to negotiate terms to acquire the lowest rates possible.
How It Works
When launching a municipal energy aggregation initiative, there are a few easy steps that should be considered.
Step One: Local officials approve referendum for aggregation program to be placed on a ballot
Step Two: Municipal board selects officials to create the referendum, inform residents, negotiate terms with suppliers, coordinate utility transitions, answer all questions and manage the process from start to finish
Step Three: Residents put the referendum to a vote during the next election
Step Four: Referendum approval triggers officials to negotiate energy rates with national and regional suppliers
Step Five: Residents are transitioned to lower rates with new or existing suppliers
Step Six: Local government continues to monitor supplier and utility performance, and negotiates new contracts when up for renewal
Benefits For Municipalities, Residents
When a local government passes municipal energy aggregation laws, officials leverage the purchasing power of an entire community to save on energy costs. While large businesses have been able to find ways to reduce energy costs, residents and small businesses have struggled to negotiate rates. Working together as a unified entity, a community can make the competitive nature of energy distribution work in its favor, forcing providers to be more flexible with rates. Energy aggregation programs offer residents and small business owners:
- Affordable rates without a tax burden of maintaining an antiquated system
- A choice of electrical suppliers to enhance sustainability goals
- Opportunities for reinvestment in local organizations through a variety of energy-focused funding plans
- Program optimization potential to further increase energy efficiency and smart consumption
One Step Further
Many cities are looking at other ways to reduce energy use through solar power and efficiency programs that not only reduce costs but initiate long-term programs for continual savings and sustainability.