Wednesday, March 01, 2006

Working hard for our money...

Will the Columbia Association be the next Enron?

The Columbia Association is forming a purchase co-operative that will give residents and businesses in the community the opportunity to buy electricity at a discount rate.

Prices will go up in July when the six-year state regulation on electricity expires. Baltimore Gas and Electric Co. customers reportedly will pay 40 percent to 80 percent more.

...Karen Hawkins, a spokeswoman for the association, said specific details of the co-op, including those who would be eligible, are still to be decided. She said the co-op is expected to begin by early May.
Because of CA's unique position as a homeowners association/quasi-government/nonprofit organization, it is able to buy electricity wholesale and pass the savings onto us (or at least those of us who live in Columbia and opt into this program). Although savings won't be terribly large -- between 6 percent and 11 percent -- any little bit helps.

I can't think of any reason why this would be a bad thing, but I'm not an economist. Here's what practioners of the dismal science have to say about the co-op.
"There is no guarantee that [a cooperative] will be favorable," said Steven Estomin, a senior economist for Exeter Associates, Inc., a Columbia-based economic consulting firm. "The problem is you never know when the market is going to go up."
Um, unless I'm misunderstanding, I think it's pretty clear the "market is going to go up" once the state regulations are lifted. Anyway, back to the experts...

Art Holland, director of power and forecasting for Pace Global Energy Services, an energy consulting firm in Fairfax, Va., said: "It's a price uncertainty, and it's also a volume uncertainty, as well. The volume uncertainty is not knowing what the demand will be with exact certainty."

"If it's hot, people are going to turn up their [air conditioners] ... and it's driven by weather," Holland added. "It's a risk you have to manage effectively, and if they don't, their customers will pay."

Aren't we going to pay either way? I'm not quite sure what these guys are getting at, but then, I'm not really giving this much thought; too many other things to write about.

If you know of a reason why this is a bad move by CA, let me know in the comments section.