In late June 2006, World Energy held an online auction event for a Midwestern state government agency. The auction involved the procurement of 180 million kWh with a term of 17 months for an aggregation of participants . World Energy’s market directors developed forward curves to help define target pricing and established a projected price to beat. The World Energy Exchange auction delivered a price of 6.1 cents/kWh, which, using an official market formula, worked out to a rate of 6.4-6.5 cents/kWh for the members of the aggregation group depending on their rate class. About three months later, in September, the state hired a different well known energy consulting firm to hold a similar auction, this time procuring energy for the utilities. With market conditions very close to those in June, the common wisdom was that the state would be able to meet or beat the price the aggregation had gotten through the World Energy process. Unfortunately, the other firm was unable to duplicate World Energy’s success and the utilities received a price of 6.8 cents/kWh, working out to a retail price of 7.5-8.0 cents/kWh for the consumer. Result: World Energy’s process and people were able to beat the later wholesale auction by 0.7 cents/kWh wholesale, resulting in savings of 1.1-1.5 cents/kWh retail for the rate payers. The state agency has saved approximately $840,000 in electricity supply purchased over the course of three World Energy auction events for various contract periods. Compared to estimated utility rates, the three auctions realized cost savings of 12.4%, 3.5%, and 21.6% respectively. Back |
