The Pros and Cons of an Electric Aggregation

So let’s start that with the definition of an electric aggregation. It is a person or organization that brings a group of customers together. A large buying group may be able to get a better price for the group members than one can on their own.  This definition actually describes an electric utility.  In fact, they are the largest aggregator in the region and state that have zero mark up on the supply portion.  And are they the least expensive?  My ten year experience shows that all my clients have outperformed the utility default over time therefore my answer is NO.

This is because each industrial account has a unique overhead cost of capacity that is exclusive from volume. The length of a third-party agreement amortizes the cost over a longer period. Bear in mind that the solution that is arrived at for the group, in aggregate, is often not the best solution for an individual user.

Unfortunately, I have witnessed deceitful tactics by the aggregators to lure unsuspecting consumers to join and/or switch to an aggregation.  The fruit they use is that large power purchases have lower rates. This premise is generally true with a bulk purchase of goods but generally FALSE with energy supply. 

There have been several instances with our clients outperforming the aggregation offer. The reasons are:

1. Our client has a lower capacity tag.
2. The aggregator has a high margin built into the rate. 
3. The aggregation has upfront costs.
4. The term length of our client’s agreement has a lower rate.

The compelling reasons to join an aggregation are to have opposing answers to the reasons above. Also, vigilance is the best practice. My advice is to stay clear from aggregators that:

1. Claim bulk power purchase has the best rate.
2. Ask for a letter of exclusivity. It limits competition and inflates the aggregator’s margin.
3. Require an upfront cost.
4. Claim transparency. The definition is personal.  Aggregators will ask bidding suppliers to include a per kWh fee so that the ‘transparent’ quote from the supplier appears to have no margin. 

It is always good judgement to hear both sides of the story and it is likely that Neighborhood Energy will deliver your lowest rate. 

Your friendly Neighborhood Energy.