Community Choice Power Supply Program

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Community Choice Power Supply Program

• Informational Meeting
• March 9, 2006

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Colonial Power Group, Inc.

• Who are we?
• Consulting firm contracted by the City of
  Marlborough to design the program
• Seeking to lower and stabilize our fellow
  citizens energy costs
• Marlborough residents
• NOT engaged in buying or selling energy
• Compensated by Supplier, not City

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Three Main Points

• The electricity industry has changed
• You pay a lot for electricity
• Your city government is trying to help

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Goals For This Evening

• Understand Our Choices in the Power Supply Market
  
• Questions about Power Supply Market
• Understand Marlboroughs Community Choice Power
  Supply Program
• Questions about Community Choice Power Supply

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Understanding the Electricity Industry

• The Old Days

Mass Electric controlled all aspects of
electricity, from generation to distribution. It
was a state-sanctioned monopoly. Consumers had no
choice and no input.
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Understanding the Electricity Industry

• Today

GENERATION Independent suppliers (NOT National
Grid) make the power.
TRANSMISSION Power is transmitted throughout New
England.
DISTRIBUTION National Grid delivers the power
to your home or business.


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• Examining Our Electric Bill

Open to Competition and Savings
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What Are My Choices?

• 1. Status Quo National Grid will buy power for
  me every six months at the market rate (AKA
  Basic Service)
• Pros Comfort Level
• Cons Rates may fluctuate significantly
• Cons I have no control

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What Are My Choices?

• 2. I can look for a supplier on my own
• Pros I may find a better rate than National Grid
• Cons Not likely, given my relatively small usage

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What Are My Choices?

• 3. Community Choice Power Supply
• Pros Large buying pool gets me the best, and
  most stable, rate
• Pros Local control
• Pros I can leave the program anytime I wish
• Cons I have to make a phone call to my supplier
  or National Grid in order to leave the program

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Understanding Community Choice Power Supply

• Why is Marlborough starting this program?
• Competition has been beneficial for big
  businesses
• Do the same for all consumers in Marlborough
• Promote Marlborough as a better place to live and
  do business
• Make Marlborough a trailblazer in the defining
  issue of the 21st Century ENERGY

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Understanding Community Choice Power Supply

• What can I save?
• 1000 kWh/month with 10 decrease in rate
  approx. 10/month
• City will NOT sign for a rate that is greater
  than National Grids!
• What about the City as a whole?
• Using a similar scenario, the Citys residents
  and businesses will save over 3.5 million in the
  first year alone
• What do I have to do?
• Support your Citys leaders as they bring
  competition to Marlborough. Thats it.

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Key points to remember

• Direct Mail notification
• National Grid rate v. Community Choice Rate
• Opt-out process
• National Grid
• energy delivery company
• NOT an energy producing company
• responsible for
• fixing all outages
• reading your meter
• for billing all consumers. You pay one bill.

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Timeline

• February-March 2006 Public Review of Plan
• March-April 2006 Approval of Plan by City
  Council and Mayor
• April 2006 Submission of Plan to Department of
  Telecommunications and Energy (DTE) for Approval
• May 2006 Plan Review by DTE

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Timeline

• May 2006 Issue Request For Proposals for
  Electricity Supply bids
• May 2006 Select Best Supplier
• May 2006 Notification of all consumers
• June 2006 Community Choice Power Supply Program
  begins delivering benefits of competition
• The above timeline is intended for representative
  purposes only, and does not take into account
  delays at the governmental level.

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QuestionsQ. How much will this cost the city
government?A. All costs associated with the
development of the program will be borne by
Colonial Power Group, Inc. and the chosen
Competitive Supplier. Our plan calls for NO
additions to the Citys operating budget.  Q.
What if I do not want to be part of the plan?A.
Anyone can opt out of the plan at anytime by mail
or by phone. 
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Key Benefits

• Price stability
• Group buying power
• Reliability of Supply
• Universal access for ALL consumers
• Equitable treatment of ALL customers

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What can you do to help?

• Spread the word
• Visit www.colonialpowergroup.com
• Contact CPG
• Talk to your City Councilors and Mayor
• Support the Community Choice Power Supply program

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Thank YouColonial Power Group,
Inc.508-485-5858WEB www.colonialpowergroup.co
mEMAIL brian_at_colonialpowergroup.com
mark_at_colonialpowergroup.com
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Responses to Common Arguments Against Aggregation

• Government Involvement In Markets Is
  Inconsistent With Competition
• This argument has at least three flaws.
• First, government participation is not
  government regulation. Governments participate
  in markets of all kinds without regulating them.
  Municipal aggregation means participation in the
  democratic process to procure a service. The
  local government does not regulate the supplier.
  It selects a supplier.
• Second, municipal aggregation gives consumers
  more, not less, choice because it gives them the
  option of being represented collectively in the
  market rather than individually.
• Third, electricity competition is more likely
  with municipal aggregation. Competition begins
  with the incumbent utility controlling the same
  100 percent market share it has controlled for
  decades. Participation by organized customer
  groups, able to seek and evaluate alternative
  bids while reducing transaction costs, is one of
  the few means of opening up greater competition.

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Responses to Common Arguments Against Aggregation

• Aggregation Will Create Market Barriers And
  Stifle Competition
• Municipal aggregation means that consumers will
  make decisions not as individuals but as a group.
  This fact leads some to contend that aggregation
  erects barriers to the development of
  customer-supplier relationships that are the
  basis of a competitive market. This argument
  assumes that the only efficient customer-supplier
  relationship is the individual customer-individual
  supplier relationship. That assumption is not
  fact-based. Aggregators arise in many markets
  where the economics are attractive. Consumers do
  not buy bread at the mills and milk at the farms
  they buy both at groceries aggregators who
  differentiate themselves not only on price, but
  on customer services, packaging, financing plans,
  and other features.
• First, Municipal aggregation can provide
  consumers with choices they might not have as
  individuals access to more suppliers, lower
  prices, benefits to the local economy, and
  improved product quality (e.g., lower
  environmental impacts).
• Second, municipal aggregation creates strong
  buyers, which are necessary to counterbalance a
  concentration of suppliers and create real
  competition among them.
• Third, municipal aggregation enables consumers to
  avoid high transaction costs. Otherwise, the
  transactions costs that would have to be paid by
  small customers (including their time and
  suppliers advertising) will reduce or negate any
  available benefits.

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Responses to Common Arguments Against Aggregation

• Forms of Public Aggregation That Are Opt-Out
  Are Undemocratic
• Some argue that the substitution of government
  purchasing for individual purchasing is
  undemocratic because it limits the individuals
  ability to choose a supplier. In municipal
  aggregation, citizens elect city officials who
  make decisions affecting those citizens and then
  stand for reelection. To describe this
  representative process as undemocratic is to
  misunderstand, or ignore, 200 years of political
  history. One would not describe the local
  education system as undemocratic merely because
  one is obligated to attend the public school if
  one fails to select affirmatively a private
  school. In fact, the opt out approach offers
  more individual choice, because those who prefer
  to shop with sellers other than the municipality
  can do so. Furthermore, aggregation is no less
  democratic than many other municipal services,
  such as garbage collection, water and sewer
  service, and other services.

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Responses to Common Arguments Against Aggregation

• Opt-Out Aggregation Is A Form Of Slamming
• Slamming occurs when a service provider
  switches a customer without that customers
  knowledge or consent. Some have argued that
  automatic municipal aggregation is tantamount to
  slamming practices by unscrupulous businesses
  because a consumers provider is changed without
  his or her authorization. This argument has more
  rhetoric than logic. With aggregation, there is
  consent. With aggregation, the decision to shop
  collectively for cheaper electricity is made in
  the open. Consent is given by the local
  legislative body. The slamming argument wrongly
  equates a majority vote of the City Council,
  performed in an open, democratic process, with
  the secret and fraudulent practices of
  unscrupulous companies. Adherents of the
  slamming argument do not often mention the
  absence of consent accompanying the century-long
  practice of forcing most citizens to buy from
  investor-owned utilities, whose officials do not
  stand for public election, ever, let alone every
  two years. Whereas a municipal aggregator would
  have to defend its aggregation role at each
  election, the utility-as-default provider would
  obtain, and keep, the role automatically.

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Responses to Common Arguments Against Aggregation

• Public Aggregation Will Be Influenced By
  Politics And Patronage
• To block aggregation on the grounds that the
  citizens representatives will corrupt the
  process is to traffic in self-contradiction and
  in cynicism self-contradiction, because every
  citizen, including those making this argument,
  expects and receives many local services without
  citing any corruption concern, and cynicism,
  because the argument would exclude an entire
  market participant based on hopelessness over
  that participants ability to behave honestly.
  One should not let hyperbole about corruption in
  local democratic government undermine the very
  potential of that government to serve the people.
  In any event, tools are available to address
  these concerns in a measured fashion. In
  Massachusetts, the authorizing legislation set
  forth basic standards to govern municipal
  aggregation programs, including requirements for
  public hearings and adequate consumer
  notification. Legislation also subjects municipal
  aggregators to most, if not all, of the consumer
  protection provisions that govern private
  aggregators. Municipalities are also usually
  already subject to state laws requiring fair
  bidding, open meetings, and public information
  requirements, which should apply to aggregation
  programs.