Wolf Administration to save $27.2 Million Through Innovative Electricity Purchasing

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Harrisburg, PA – Through an innovative approach to shopping for electricity, the Wolf administration will save an estimated $27.2 million through 2022 – including $4.3 million in savings over the next four years for commonwealth facilities and municipal members of the COSTARS program. This is the third consecutive year the commonwealth will increase savings and decrease per kilowatt hour costs.

“My administration is continuously searching for ways to reduce costs and use innovation to improve efficiencies,” said Governor Wolf. “This new approach to buying electricity has delivered long-term savings to the state and local governments, and I commend the Department of General Services for implementing this process.”

Before the Department of General Services launched the new approach to shopping for electricity in 2015, the commonwealth purchased electricity on shorter term, 1-2-year contracts. In 2015, the commonwealth adjusted its purchasing approach to longer term, 4-year fixed-price contracts that result in better pricing and budget stability. In addition, the volume of the commonwealth’s purchasing power is leveraged by bundling accounts to receive more favorable pricing – similar to the practices employed by large commercial electric consumers.

The commonwealth also has started the practice of shopping earlier in advance of the current contract expiration dates, allowing for more flexibility in seeking favorable rates.

The energy shopping events are held in cooperation with the Penn State Facilities Engineering Institute (PSFEI) where the institute solicits the electricity accounts of the commonwealth agencies and COSTARS members for lower electricity supplier pricing.

The $27.2 million in total savings covers numerous accounts and term lengths that began to accrue in 2016 and will continue through December 2022. These savings were generated by lowering the commonwealth’s average load-weighted cost per kilowatt hour from 5.6 cents in 2015, to a current average of 5.2 cents. This average cost includes capacity and transmission charges.

“Through our partnership with the Penn State Facilities Engineering Institute, we’ve been able to develop improved approaches to how we purchase electricity and take advantage of the wholesale market in terms of favorable pricing,” Topper said. “In addition to generating these positive results, we’ve been able to expand the program to COSTARS members and pass the ability to experience those savings onto them.”

In November 2017, the commonwealth expanded its Electricity Procurement Program to COSTARS members. Since the expansion, more than $580,000 in electricity cost savings vs. prior rates have been generated. The COSTARS program allows its members – including municipalities, public authorities, school districts, and certain non-profits – to use state-awarded contracts to purchase a large variety of materials and services at lower prices.