Rhode Island Association Uncovers New Procurement Approach

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Background & Overview

The Rhode Island League of Cities & Towns (RILCT) is a private, non-partisan membership association of local governments in Rhode Island, whose mission is to represent the interests of municipal officials and to provide them with services that enhance the effectiveness and efficiency of city and town operations. The RILCT is one of 49 such municipal associations in the U.S.

In the late 1990s, when the state of Rhode Island began to deregulate its energy markets, the RILCT began exploring how energy deregulation could benefit its members. The result was the formation of the Rhode Island Energy Aggregation Program (REAP) in 1999 for RILCT members. Since the inception of REAP, the program has regularly had the participation of almost all RILCT members—which include eight cities and 31 towns—and it had been served by three suppliers prior to 2012.

Objectives & Approach

In 2011, with very high unemployment rates in the state and very tight municipal budgets, the RILCT was looking for a different approach to energy procurement for its members. Previously, the three retail energy suppliers that had served RILCT members in the REAP program had all done so using a fixed price contract that the RILCT secured up front on behalf of its members. The executive director of the RILCT knew that this approach needed to be modified to help all members benefit from advantageous market movement at whatever point in time they were prepared to enter into a new contract.

With a new strategy in mind, the RILCT issued an RFP and Direct Energy Business was selected from a pool of nine suppliers based on:

• A proven track record with other like-size commercial entities—including both public- and private-sector organizations
• The strong desire to enter into a long-term relationship with the RILCT
• The willingness to make the relationship “work” through flexible contract terms and guaranteed service levels
• The close proximity and accessibility of the regional sales representative to the RILCT offices
• The ability to deliver on promises throughout the RFP review and supplier selection process

Strategy & Relationship Outcome

Direct Energy Business presented the RILCT with contract terms that allowed members to sign on at any time and lock in at a fixed rate that reflects market rates at the time of signing the contract. This approach allows members to:

• Capitalize on favorable market movement, rather than being obligated to sign at a fixed price, secured at a point in time in the past that may or may not be lower than current market prices
• Select a term that fits the expectations and needs of the individual city or town
• Learn more about buying options and contract terms prior to locking in—allowing city officials to thoroughly vet their options and time their contract execution with favorable market conditions

In addition to contract terms that provide members with both flexibility and budget control, the level of personalized service and educational outreach provided by the Direct Energy Business sales team has given RILCT members the additional insights and important considerations to make better buying decisions. Because of this commitment to provide educational information about market conditions, energy purchasing and the contract terms and details up-front, all member cities and towns signed a contract with Direct Energy Business within a few months of Direct Energy Business winning the RFP.

Estimated Member Savings

With Direct Energy Business, RILCT members who are currently under contract are realizing an approximately $6 million annual budgetary savings over their last supply contract.* Overall, since the REAP program began, members have saved a cumulative $28 million over standard offer utility service rates.

* Savings numbers were calculated based on a total member load (at the time of publishing) of approximately 200,000 MWh annually.

Posted: August 14, 2015