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PowerOptions is the largest energy-buying consortium in New England, with more than 450 members—all nonprofits and public entities—across Massachusetts, Connecticut and Rhode Island. A nonprofit serving other nonprofits for more than 20 years, PowerOptions has pursued a mission to save its members time and money on energy, so more resources could be directed toward pursuit of members’ important missions. PowerOptions brings budget certainty, financial protection and advocacy on issues of cost and reliability for nonprofits in the complex and often volatile energy markets.
In 1998, Massachusetts deregulated its energy market, opening up electricity and natural gas supply to competition. This meant that for the first time businesses would be able to shop around for their energy supply, compare offers and find the most advantageous arrangements. Robert J. Ciolek, then executive director of the Massachusetts Health and Educational Facilities Authority (HEFA), didn’t know anything about energy, but he recognized that nonprofit organizations could benefit from these open, competitive markets. HEFA, an agency that until then had been solely focused on providing tax-exempt financing to large nonprofit health and educational institutions, formed PowerOptions, consolidating the buying power of nonprofits of every sector and size, as well as municipal, state and federal public facilities. Timing was perfect, and PowerOptions was first to market with a competitive energy supply offering. To earn PowerOptions’ strong market share, suppliers bid very competitively, which especially in the early years led to substantial savings for participating nonprofits. In 2010, HEFA was merged into another state agency, and PowerOptions became a stand-alone nonprofit, formalizing its mission to help nonprofits save time and money on energy.
PowerOptions is funded through a combination of membership dues and payments from the suppliers to its programs. The suppliers support PowerOptions’ costs of negotiating, managing and marketing these programs through a fixed fee and an additional fee payable upon reaching certain annual usage thresholds. The cost is not discernible in members’ price quotes. Unlike typical broker or referral fees, the payments are not based on individual transactions, so this cost to the supplier is not added on to the individual price quotes to members. This distinction is important, as it reinforces the objectivity of PowerOptions’ staff in providing advice to members about their decisions regarding energy purchase. Further, this cost is substantially less than what suppliers would have to spend on marketing and a sales force to reach a customer base like the PowerOptions consortium.
In addition to covering PowerOptions’ expense in administering the program, these funds cover the cost of developing new products and services for our members, such as solar programs, as well as advocacy in regulatory matters and regional forums.
Every PowerOptions supply program begins with a robust competitive procurement. The PowerOptions team meets with market participants to evaluate current conditions, emerging trends and new technologies. Then the RFP process begins. Suppliers vie for the opportunity to serve the consortium, and every procurement has always resulted in multiple supplier proposals. PowerOptions negotiates with suppliers, leveraging the buying power of the group—$200 million annual energy commodity purchases—and selects the supplier with the lowest price and the willingness to adhere to PowerOptions terms and conditions—the customer protections at the heart of PowerOptions’ offering.
PowerOptions enters into a master agreement with its energy suppliers, which outlines the responsibilities of suppliers to members, the pricing structure, the supply contracts terms and conditions, as well as the suppliers’ arrangement with PowerOptions. Once entered into this agreement, suppliers can’t alter these terms and must make them available to any PowerOptions member regardless of their size. Through the agreement, suppliers agree that PowerOptions will have the right to monitor their performance under the contract and, where appropriate, pursue members’ best interests in issues arising from the relationship. It is important to note that PowerOptions does not take title to the energy or sell energy. Rather, our members enter a bilateral contract directly with energy suppliers and the terms of that contract have already been negotiated. Any PowerOptions member that is in good standing is eligible for any of the supply contracts.
Direct Energy supplies the natural gas program. Direct controls the largest amount of pipeline capacity in the region of any other competitive supplier, which provides for beneficial prices to members. Constellation Energy is the supplier to the electricity program. Constellation is one of the largest suppliers in the U.S., and offers forward-thinking tools and services to help members stay on the forefront of energy technology. Solect Energy is the developer for PowerOptions’ solar programs.