City Leaders Explain Electricity Agreement Was ‘Best Deal We Could Get’

Orlando Pacheco with Haverhill Mayor James J. Fiorentini after Pacheco's 2014 hiring as city purchasing agent.

City Energy Manager and Purchasing Agent Orlando Pacheco with Mayor James J. Fiorentini.

Haverhill city leaders told city councilors Tuesday night why a one-year agreement for an electricity aggregation program beginning in December is “the best deal we could get at this point.”

The city’s agreement with electricity supplier Hampshire Power, Northampton, Mass., lowers energy rates for Haverhill residents and businesses already on National Grid’s default plan.

City Energy Manager and Purchasing Agent Orlando Pacheco, joined by Mayor James J. Fiorentini, explained the city’s one-year agreement brings stability to winter electric supply rates in the face of “market instabilities” and “unknowns of the marketplace.” Those unknowns include future resources and weather. with competitive supplier Hampshire Power, Northampton, Mass.,

Haverhill City Councilor Michael S. McGonagle.

Haverhill City Councilor Michael S. McGonagle.

Responding to an inquiry by Councilor Michael S. McGonagle on why a longer term was not taken, Pacheco said bids received beyond a one-year term were “starting to get more expensive” with potential risks factored such as a long-term power generation loss from closing of the Pilgrim nuclear power plant in Plymouth.

“We don’t want to be in that level of speculation just yet. Our goal was to stabilize and reduce price and I think we accomplished both those goals with a certain amount of success,” Pacheco said. “And so, what I think what we’ll do is we’ll re-examine the marketplace come April or May – the shoulder months – and see if we can lock in a new term prior to the expiration of this existing agreement. But certainly we don’t want to be out in the marketplace too close to the winters. The more winters in your supply contract the better, but at the same time there’s some risk there. And so 12 months was a good number for us.”

Fiorentini, meanwhile, told councilors he had “always been skeptical” of aggregations in the past, but “this time it worked and hopefully we can continue to do it.”

“What I wanted to avoid is what several other cities that have gone into aggregations have experienced. They locked in rates for a long period of time—five years—and then they discovered that energy rates don’t always go up. Sometimes they go down and that’s what happened with, you know, the miracle of shale and natural gas. Rates have gone down on many occasions so we now have cities in aggregations where the consumers are paying more than they pay had they never done anything. So we wanted to avoid that and that was the main reason we locked in for a year,” Fiorentini said.

City Councilor Melinda E. Barrett.

City Councilor Melinda E. Barrett.

Asked by Councilor Melinda Barrett about the impact on individuals, such as herself, who hold supply contracts with other providers independent of National Grid, Pacheco said they would be able to “opt in” with the city, but also advised added costs could come with changing to the city’s plan.

Pacheco: “I think the one thing they want to make sure is that there’s no fees to leave the agreement, because in many cases we have seen anywhere from 50 to 300 dollars to leave a supply agreement. And so, all your savings would be taken away from you to enroll so sometimes it may not be in your best interest to do that.”

Barrett: “But if your time runs out with your agreement, whatever you had signed up for and then you want to get in with the Haverhill aggregate, say, in January mine runs out, I just call…”

Pacheco: “You would call and we would enroll you or we would send a letter to the supplier and the supplier would enroll you. One of us would handle that transaction for you and then within the next meter read, so in 30 days you would be enrolled in the program.”

Under the Community Choice Power Supply Program agreement Fiorentini signed Oct. 14, the rate of $.09975 cents per kilowatt-hour, takes effect with December meter reads. The rate compares with National Grid’s basic supply rate of 13.1 cents through April, 2016. The agreement does not affect “distribution” charges that appear on National Grid bills.