Solution

To help provide this lower pricing, Alternative Utility Services set up a private aggregation program. The “residential electric space heat” tariff started in this area as a subsidized rate to encourage people to use more electricity and thereby increase demand.  Builders liked it because it was cost effective, and that’s how this area ended up with many all-electric homes or condos.

An “all-electric” account’s usage pattern is much different than a traditional electric account. Instead of the typical bell curve for usage, with higher patterns in the summer (for air-conditioning), an all-electric or “space heat” account maintains high usage in both the summer and winter.

Government/Municipal Energy Aggregation programs usually do not consider the different rate classes as part of their program. When a city solicits for bids, they aggregate all residential and small business rates together to get one price.  All-electric accounts use more energy than typical accounts and their load profile makes them more attractive to suppliers.

Pricing as a whole is very competitive as a result of combining all of the rate classes together.  Standard residential customers end up receiving very good pricing, pricing they wouldn’t have been able to achieve on their own. 

However, residents in all-electric buildings end up paying more under this particular aggregation program than if they would have combined just their loads together. This is because accounts being served under the “residential electric space heat” classification no longer experience preferential treatment in the form of subsidized pricing from their local provider.

They can, however, still take advantage of lower than average pricing from alternative suppliers.

Alternative Utility Services sets up a private aggregation program. These programs rely on the same underlying theory as municipal aggregation programs to produce savings; increase buying power to become more attractive to alternative suppliers.

But private aggregation programs do this with much more discretion than municipal aggregation programs. Private aggregation programs target specific types of customers, such as those that use electric space heat, and affirmatively aggregate just those specific accounts together.

Though this discretion means that private aggregation programs will have far fewer participants than the catch-all municipal aggregation programs, suppliers are willing to offer more competitive rates for the assurance that they only have to serve the kinds of accounts that they truly want to serve.

Added Benefit

Alternative Utility Services successfully aggregated 48 buildings with a total of 12,200 residences for a savings of 17% below the city’s local aggregration rate.