Guest blog: Steve Thornbury explains gas aggregation

Yesterday, we received a “free gift” from Councilperson Steve Thornbury - this guest blog about a natural gas aggregation plan that may wind up as a ballot initiative for us to vote on. We thank him for taking the time out of what we know is a very busy schedule to provide this informative piece for our readers:

At the recent Committee of the Whole meeting (Tuesday, May 6) the sole item on the agenda was a presentation from a gentleman representing Integrys Energy Services regarding the idea of “gas aggregation.” It was a very enlightening evening. I’m sure many Norwood residents are like me in that we’ve heard the term before but have never had a good explanation of what it really is.

First, a bit of background (much of which is lifted from the Ohio PUCO web site)…

Beginning in 1997, residential and small commercial customers throughout the state were, on their own, allowed to choose their own natural gas suppliers. They still do for that matter. More recently however, local communities have been given the right, by law, to join their citizens together to buy natural gas as a group and, on the group’s behalf, negotiate with a private company the terms, conditions, and price of the natural gas supply.

The people who presented to us at the COW meeting are from such a company.

First of all, before expectations run rampant, programs such as these are not sold with the promise of huge savings. Just as an investment advisor cannot promise a return on a mutual fund and can only point to past performance, this company presented a few instances of other communities which have done gas aggregation and the savings average out to be, at best, $50 per single family home over a four to five month period. But, savings are savings.

What the company primarily touts is stability. Today, when you get your Duke Energy bill, the cost of gas is reflected in a number called Gas Cost Recovery (GCR). If you look closely, you’ll notice that number fluctuates from month to month much like the cost of gas at the pump fluctuates. As you can well imagine, the GCR tends to go up almost every month on our bill. Recently it’s been going up quite a bit every month. What companies like Integrys offer is the opportunity to lock in a price now that will be guaranteed throughout the life of the “contract.” The length of the contract, apparently, can range from a year on the high end to six months on the low end.

Here’s a FAQ from Integrys that answers many of the questions we asked at the meeting.

The biggest news is that doing it would require approval of a ballot initiative by the voters. The other tricky aspect is that, if it were approved, all residents would be included unless they specifically chose not to… each of us would be given the opportunity, in other words, to opt-out.

Other key facts:
-It only involves residents and very small businesses. It does not affect large companies, the City’s properties, or the School District’s properties… (They all have their own aggregation programs they could set up.)

- It doesn’t change a thing about your current billing. Opted-in or opted-out, you still receive your same Duke Energy bill.

-While there are several pricing options, the one that was recommended is something known as “Locked-in Price with Flex Down OpportunitySM Rate” in which “the price for your gas commodity is locked-in. However, if the market falls significantly, then a lower rate will be provided on a month-to-month basis.”

In general, from where I sat, the other members of Council seemed receptive to the idea. The consensus was that we would continue discussion at the next COW meeting. If we wanted to do it and have it on the ballot by the November election we’d need to have decided and have the request sent to the Board of Elections sometime mid- to late-summer. Even then, if approved by the voters, the system would not kick into place until late 2009.

Feel free to contact me or any other member of Council if you have questions, comments or concerns.

-Steve Thornbury
Ward 2, Norwood City Council
Ph. # 373-9653