An Energy Broker Comes To Town: City Considers 5-Year Deal With World Energy

The days of your good, old, regulated electric light company are over.

That was abundantly clear at an August 16th meeting of the New Britain Common Council’s consolidated committee. City councillors heard officials of Worcester, MA-based World Energy Solutions explain how they can lower energy costs for the city by being an “honest broker” in a deregulated marketplace where electricity’s price is skyrocketing.

The New Britain meeting stemmed from a resolution filed by Council Minority Leader Louis Salvio that authorizes Mayor Stewart “to enter into a contract for a period of five (5) years with World Energy Solutions…for the procurement and contract management services to obtain the lowest energy prices for the city.”

Obtaining a lower price for electricity is a necessity for financially-distressed New Britain with current costs of power by the local government and schools approaching $4 million this year, according to Ward 2 Councillor Adam Platosz.

Platosz was the author of a resolution early in the year that asked the city finance department to seek “aggregator” status for New Britain in light of double digit electric rate hikes. Under state law, a city on its own can pursue bulk buying and even allow residential users to take advantage of bulk buying through the municipality to lower their bills.

While the Platosz resolution has been ignored for months by the city administration, the arrival of World Energy at the invitation of Mayor Stewart re-opens the debate on the best options the city has to lower its energy costs and perhaps lower rates for residents.

World Energy Solutions representatives delivered an impressive portfolio of their company to the sparsely attended council meeting.

The company, using a sophisticated online auction platform, essentially acts as an “energy realtor” — a term used by Council President Suzanne Bielinski in trying to understand procurement services. World Energy engages energy suppliers in bidding for the sale of power to their large customers, including states, the federal government and corporations.

Founded in 1996, World Energy describes itself as a leader in the “online energy brokerage market, providing technology and intelligence for brokering electricity, natural gas, wholesale power, fuels and green credits.” The company, one of a number now engaged in brokering energy, was created at a propitious time when de-regulation dramatically changed the way public utilities did business.

The de-regulated industry has spawned a system of generators (power plant operators), suppliers (energy sellers) and distributors (utilities). Lest you think Connecticut Light & Power (CL&P) and United Illuminating (UI) will disappear, think again. CL&P and local utilities remain the distributors, owning the wires, poles and infrastructure that delivers the power. Most of us still pay the utility for both supply and distribution as CL&P and UI purchase power from suppliers twice a year, passing costs on to residential and business users.

World Energy and similar outfits now act as the “middle men” in an industry that once was strictly regulated on price, but now is subject to wild swings. Taking advantage of deregulation, the brokers are now the auction experts who go out and find the best price for a city or state government. They take their profits from the generator-supplier-distributor chain before it reaches users.

Jonathan Harvey, a World Energy government relations official based in Washington, D.C., informed the City Council that his company makes its money through “performance fees” in a procurement process that knows no state or national borders. He assured the councillors that “there is no direct cost to you.” According to World Energy its “online reverse auction platform” saves customers “an average of 11% compared with traditional paper-based approaches to energy procurement.”

While World Energy’s credentials impressed the city councillors, the proposal has been brought forward by the city administration without the customary requests for proposals and bidding process that would normally be part of a multi-year municipal contract. That will inevitably be brought up before a vote is taken on this particular proposal.

Council Majority Leader Michael Trueworthy asked how World Energy came to New Britain. Apparently, the Stewart administration has not shared anything with the Council, including Trueworthy who with Bielinski meets with the Mayor on a routine basis to discuss city business. Harvey, accompanied by Connecticut Marketing Director Bill Thibodeau, would only say that his company is knocking on the doors of Connecticut city and town halls because it has just won a State of Connecticut contract to provide procurement for state agencies.

A recently released press release from the company’s website confirmed the state deal: “We are pleased that the State of Connecticut has selected us as its online energy procurement solution, which we view as further validation of our position as the leading provider to U.S. government agencies at both the state and local levels.”

The proposal to authorize the Mayor to enter a five-year contract with World Energy Solutions deserves a thorough review and discussion by the Council. No matter what the outcome of engaging an energy broker, the discussion should also re-open Ald. Platosz’ original plan to give New Britain aggregator status, empowering the city not only to seek fairer rates for itself but creating a municipal “pool” whereby residents could realize savings too. Absent a state law that protects consumers from spiraling rates, New Britain needs to be an aggregator of its own power with or without World Energy’s services.