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New Power Contract Should Lead to Residential Savings

BERLIN – Following a competitive internet-based bidding process on the World Energy Exchange, the Town of Berlin has signed a new one year purchase power agreement with American Electric Power Service Corporation (AEP), which will save the town’s residential electric customers about 12 percent on average below their current monthly bills starting this summer.

The savings will be reflected in each customer’s bills through the Power Cost Adjustment (PCA) portion of their monthly electric bills. The full impact of the reduced power supply cost will be phased into rates through the PCA over three months beginning with the billing customers receive in August.

“PCA charges represent just over one-third of the cost per kilowatt hour for residential customers, so the savings provided through the new contract will have a measurable impact for Berlin electric customers,” said Mayor Gee Williams. 

Three nationally qualified firms competed on March 29 in a live auction through the internet in what is commonly referred to in the power industry as a descending clock approach where each successive bid is lower than previous bids.  All bids were made in real time and were simultaneously visible to all of the competing firms and to Berlin officials and the town’s electric engineering consultants.

In 2009, using a traditional request for proposals (RFP) format, the Town had only one qualified bid for a power supply agreement. The primary goal of Berlin officials at that time was to stabilize electric rates that had risen dramatically in the previous year in the open marketplace where the town had been purchasing power.

“Our goal this year was to be more ambitious by using World Energy’s internet auction approach in order to produce the lowest possible purchase power contract by attracting multiple qualified bidders to compete with each other in real time,” said Williams. 

“I believe the town has taken a positive step in an unpredictable energy market by contracting a power supply agreement that will reduce the cost of purchased power over the next year compared to what we have been paying.”

The internet auction was conducted by World Energy Solutions (NASDAQ: XWES) of Worcester, Mass., and APPI of Salisbury. Berlin officials were guided and advised through the process by two electrical engineering consulting firms, Booth and Associates Inc. of Raleigh, N.C., and Customized Energy Solutions of Philadelphia.