SOUTH PORTLAND — The city is considering buying electricity on the wholesale market to cut its electricity bills and possibly those of residential and commercial customers.

The concept calls for the city to form a nonprofit energy supply company, called South Portland Energy, which would be able to get cheaper rates because it would buy power in bulk.

A conservative estimate for savings on electricity – which is separate from the transmission and delivery of power –- is 10 to 20 percent, said Assistant City Manager Erik Carson. The savings could be passed on to users or go into a fund for projects.

“It’s about buying power at a wholesale rate, which is substantially cheaper than the retail rate,” Carson said as he outlined the concept during a City Council workshop Monday night.

The plan would focus first on the city’s electricity costs.

South Portland now has costs ranging from 7.29 cents to 9.77 cents per kilowatt hour through Maine Power Options, a retail broker.

If South Portland Energy bought power directly from ISO New England, the operator of the regional grid, the cost would be about 4.5 cents to 6.5 cents per kilowatt hour, according to supporting documents from Carson.

If the plan expanded to residential and commercial users, they would have the option of choosing South Portland Energy as their supplier.

Central Maine Power Co. would continue to deliver the power and do the billing.

Businesses often cite high energy costs as one reason why it’s difficult to operate in Maine, Carson said, so making lower electricity rates available could help economic development.

No other municipality in Maine is supplying power based on such a model.

South Portland Energy would be different from utilities like Madison Electric Works and Kennebunk Light and Power, which supply power and have their own transmission and delivery systems.

City Councilor Linda Boudreau said she is intrigued by the idea but worried that it sounds too simple to be true.

Councilor Maxine Beecher questioned why other communities haven’t pursued similar plans.

Carson said that establishing such a system requires a process that is not inexpensive. Also, he said, many communities don’t have enough users to make it possible.

South Portland is able to pursue wholesale energy purchasing because of electricity deregulation.

The state developed a similar plan in 2008, but it died as other priorities in state government took precedence, said Paul Aubrey, a consultant to the Governor’s Office of Energy Independence and Security.

Aubrey is providing free consulting to South Portland on the energy supply company and other energy-related plans.

City Manager James Gailey said it would be possible to determine whether neighboring communities are interesting in joining South Portland, but he and Carson first wanted to run the idea before the City Council.

Carson estimated it would cost $25,000 to $50,000 to get the system running.

Much of that cost would stem from getting a wholesale account established with ISO New England. The account would not be set up if South Portland Energy couldn’t get enough users together for the wholesale rates.

South Portland Energy would use a power broker to monitor rates and negotiate contracts with ISO New England.

Carson said he took the broker’s fee — 0.1 cents to 0.5 cents per kilowatt hour — into account when estimating the cost savings.

The energy supply company would not add to the workload of the city staff, Carson said. “That’s why you hire the broker.”

Mayor Tom Coward said the city’s potential savings would be a worthy goal in itself.

He said he would love to have the additional incentive of lower electricity rates to pull business into South Portland.

“I don’t see a real downside to this, other than if it just doesn’t work and we spend some time and energy,” he said.

 

Staff Writer Ann S. Kim can be contacted at 791-6383 or at: [email protected]