Bizs urged to shop for energy

ALTERNATIVE ENERGY: David Silva, a material handler at Ferguson Perforating in Providence, moves rolls of sheet metal with a hydraulic lift. / PBN PHOTO/MICHAEL SALERNO
ALTERNATIVE ENERGY: David Silva, a material handler at Ferguson Perforating in Providence, moves rolls of sheet metal with a hydraulic lift. / PBN PHOTO/MICHAEL SALERNO

Rather than trying to predict the increasingly volatile price of energy, some Rhode Island businesses are saying ‘no’ to National Grid’s fluctuating prices and entering into predictable, multiyear contracts with other energy suppliers.
Peter Fahlman, president of Providence’s Ferguson Perforating Inc., in December locked into a three-year contract with Boston-based Constellation NewEnergy Inc. Fahlman’s new fixed rate, at 8.8 cents per kilowatt hour, lets him take the guesswork out of some of his overhead costs, allowing him to bring more stability to his pricing.
“Obviously, at 8.8 cents, we’re pretty pleased,” Fahlman said. “The primary reason we switched was because we wanted to get our hands around the energy costs. … If you can fix the cost, rather than being subject to whatever prices come at you, it helps.”
Many National Grid electricity customers, businesses and individuals alike were left frustrated last month after the Public Utilities Commission approved double-digit rate increases for commercial, industrial and residential customers.
The cost hikes, for the most part, are a byproduct of the region’s high demand for natural gas, which is cheaper, but limited due to constrained infrastructure. High demand with low supply, including a decreasing availability of alternatives such as coal and nuclear power, cause prices to soar.
For larger commercial companies heavily dependent upon electricity, National Grid’s rate increase of about 24 percent will likely become an absorbed cost, at least initially, because of the limited time they had to plan for the increase, according to Bill McCourt, Rhode Island Manufacturing Association executive director. He is urging his members to seek alternative suppliers because unpredictable costs are difficult to manage if a supplier – like National Grid – doesn’t offer multiyear, fixed-rate contracts.
“I understand the need for the increase, and I understand how the system works and the need for National Grid to increase its rates,” McCourt said. “But you have very little time to react to the increases. National Grid announces it and you have maybe a month to adapt before you’re hit with those increases.” Electricity – after personnel and raw material – is typically among the largest costs of running a manufacturing business. National Grid, although the bearer of higher-priced electricity, isn’t directly responsible for the increased cost of energy, as costs incurred through the wholesale market are passed along to the consumer.
National Grid’s “standard offer” for commercial customers at a fixed rate will reflect about a 24 percent increase over the next year. From January to June, commercial rates will be charged at 12.139 cents per kilowatt hour. From July to December the rate will decrease to 10.592 cents per kilowatt hour.
Alternatively, commercial customers can enter National Grid’s variable option, which is based on a six-month sliding scale beginning in January at 20.347 cents per kilowatt hour before subsequent decreases each month ending in June at 8.162 cents per kilowatt hour.
Ferguson Perforating employs roughly 125 people and does about $30 million in annual sales. The business, which specializes in perforated metal products, is heavily dependent upon electricity and Fahlman says historically National Grid has been the best choice, but he’s glad he made the switch.
Ferguson Perforating isn’t the only business making the jump, according to McCourt, who used to run a chemical manufacturing company out of West Warwick. He moved his company off National Grid eight years ago and he says the trend is picking up. Other companies like Smithfield-based Rhode Island Carbide Tool and Warren-based Taylor Box have also made the leap in recent months, McCourt says.
“We’ve had a number of companies move off of National Grid,” McCourt said, adding that for many businesses it’s a matter of understanding that there are alternative suppliers out there. National Grid is the largest energy supplier in Rhode Island, but it’s not the only player in town. Constellation NewEnergy, Fahlman’s new supplier, is one of dozens of nonregulated power producers registered with the R.I. Division of Public Utilities.
Some of the companies, based in different parts of the country, only provide services to commercial and industrial customers. And while the state allows the suppliers to do business in Rhode Island, it doesn’t mandate they offer service.
National Grid is mandated by statute to provide a “standard offer” in Rhode Island, and after receiving heavy public criticism for the most recent rate increase, it pointed out the fact that there are other options.
A Dec. 22 press release linked to a website with a full list of competitors.
National Grid spokesman David Graves says the utility is working with the state to fine tune the list of alternative energy suppliers and urges all customers to educate themselves on their options.
It was unclear last week how many customers have left National Grid due to the rate hikes, which included a monthly 14.2 percent increase for residential customers. Industrial customers will see a whopping increase of 79 percent for the first three months of 2015.
About 10,640 – 18 percent – of the 58,011 Rhode Island commercial customers receive energy from alternative suppliers and the rest purchase through National Grid, according to Graves.
For a lot of companies, National Grid’s rate increase won’t really sink in until after receipt of January’s electricity bill, but McCourt believes that once it does, other companies might consider looking elsewhere for service.
“If you can lock into a multiyear contract, prices might go down and you might lose out, but you have price stability,” McCourt said. •

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