Should You Join Your Community’s Energy Aggregate?

Deregulating energy brought lower energy prices and greater consumer choice to states that implemented it. One overlooked option for many consumers was the ability to form pools to buy energy in aggregate. This promised greater consumer power over suppliers for individuals in the pool and the possibility to negotiate lower prices for entire communities.

Yet, as more data comes out, communities are beginning to rethink whether energy aggregation is beneficial. Here, I’m going to explore the pros and cons of energy aggregation for whole communities and whether you should consider joining an energy buying pool.

Pros

Consumer Bargaining Power

The biggest perk of buying in pools is that consumers now have more power as a collective. Energy companies can’t ignore the demands of the collective pool and risk losing a large portion of its customer base. With this power comes the advantage of being able to negotiate for lower prices, spurring more competition among energy suppliers.

Collective pools will receive rates at wholesale value and can potentially negotiate for rebates and discounts among its members or take its business to another supplier. This results in lower prices for many consumers than what they were paying before the pool. This is also ideal for multifamily properties that could put their resources together to negotiate for lower prices across the entire property.

Collective Knowledge

In some states, deregulated markets can be saturated with up to hundreds of suppliers. Sifting through endless contracts and offers can feel impossible. With collective pools comes greater resources to hire an energy consultant or energy expert who can help pools manage the best rates for their municipalities. Essentially, collective pools could make more informed decisions than the average individual in regards to their energy contracts.

Stability

With energy aggregate contracts comes greater transparency and market certainty. Individuals trying to negotiate their own contracts often run into hidden fees, unpredictable variable rates, and poor customer service. Collective pools mitigate these issues by making informed contract purchases and having the power of the collective to keep suppliers honest in their business dealings.

Consumer can Opt-Out

If individuals in the community don’t like their collective bargaining agreement, they can simply choose not to opt-in to the contract.

Cons

Reduced Flexibility

When you opt-in to a collective bargaining agreement you are locked in to your contract for the duration of the term. In some agreements, individuals will be forced to eat some of the costs of additional services that the community at large requested.

Less Competition

Energy aggregation may actually reduce competition in the market by concentrating a large amount of consumers to a single supplier. This also eliminates many of the benefits inherent in competition, such as the increased selection of choice, lower rates, and better customer service.

Pricier for Some Individuals

The final bill for your collective contract may actually be higher than you expect due to inconsistencies and esoteric arrangements during the group buy. With lower market rates available, it may be cheaper for some individuals to simply shop around on their own and make the switch to a cheaper supplier before an aggregate contract begins. The rates will also be determined by averages and may not be suited to individuals who use less energy.

No Control

Finally, individuals in the collective pool have very little influence or control over the whims of the majority. Once you opt-in, it could be difficult and costly to switch suppliers, significantly reducing your own choices for energy supply.

Conclusion

Buying energy in aggregate really depends on your individual energy usage and whether most of your members of the community will benefit from collective energy agreements. Hire an energy consultant and contractor before making a decision to see whether you are getting the best deal for your community.