Sunday, December 04, 2005

CA: The new BGE?

Hayduke has often wondered what exactly Columbians get for the “taxes” they pay to the Association each year, aside from covenant enforcement and access to lots of open space (which non-Columbians can access as well, creating the dreaded [at least by economists] free rider problem). And I know that CA provides a bunch of amenities, like a fitness center, golf courses, and other recreational programs. But all of these cost extra.
So, what do you get for your CPRA money? Maybe a lower energy bill.

The association's board of directors is studying how to form a buying cooperative that, in Maryland's deregulating energy market, would shop for the best deal on electricity. Under state law, city and county governments are forbidden to launch such arrangements. But the odd governance structure in this Howard County planned community provides a rare opportunity.

The discussion comes amid expectations that electric bills for residential customers of Baltimore Gas and Electric Co. will rise 20 percent to 30 percent next year when the state rate cap is lifted July 1, according to the Maryland Public Service Commission.

The rate increase is "expected and alarming. The numbers are significant," said Joshua Feldmark, chairman of Columbia's 10-member board of directors. Forming a buying cooperative "is something worth getting into," he said. "We can provide a value-added benefit for living in Columbia. That's at the core of our mission."

One consultant estimated that a Columbia cooperative could buy electricity at 6 percent to 8 percent below market rates, depending on the deal struck. The risk would be locking into a rate that is too high in a fluctuating market.

At first blush, this seems like a good idea, especially if Maryland’s deregulating energy market at all resembles California’s of a couple years ago. However, sorting out the details of this program would be an immense undertaking. A story from the Columbia Flier elaborates on some of the specifics.

Under the proposal, CA would act as the broker between residents and the utility company and leave such tasks as billing and customer service to the company. The program would be optional for residents.

Optional is good, as is leaving administrative tasks to someone else. But there is still much to be worked out, and I’m sure CA will put together a respectable proposal.

But the question remains: Is this actually a good idea?

In order for residents to recognize any real savings a large number would have to agree to participate, thereby increasing CA’s bargaining power. If only a small group sign up, however, the CA co-op might not get prices any lower than they are on the open market.

Also, won’t this program incur some costs? Would these costs be borne only by those participating in the co-op, or would they be paid out of general operating revenue?

I’ll withhold a full opinion until I see the actual plan. But, for once, it looks like CA’s bizarre status as…well, whatever it is, might be a good thing.