248 Aggregation

Aggregation is the grouping of utility customers to jointly purchase commodities and/or other energy services. There are many aggregators already formed or being formed in the states where utility deregulation is occurring. There are two basic forms of aggregation:

1. Similar Customers with Similar Needs

Similar customers may be better served via aggregation even if they have the same load profiles

• Pricing and risk can be tailored to similar customers needs

• Similar billing needs can be met

• Cross subsidization would be eliminated

• Trust in the aggregator; i.e. BOMA for office building managers membership

2. Complementary Customers that May Enhance the Total

Different load profiles can benefit the aggregated group by combining different load profiles.

• Match a manufacturing facility with a flat or inverted load profile to an office building that has a peaky load profile, etc.

• Combining of load profiles is more attractive to a supplier than either would be individually

Why Aggregate?

Some potential advantages to aggregating are:

• Reduction of internal administration expense

• Shared consulting expenses

• More supplier attention resulting from a larger bid

• Lower rates may be the result of a larger bid

• Lower average rates resulting from combining dissimilar user profiles

Why Not Aggregate?

Some potential disadvantages from aggregating are:

• If you are big enough, you are your own aggregation

• Good load factor customers may subsidize poor load factor customers

• The average price of an aggregation may be lower than your unique price

• An aggregation cannot meet "unique" customer requirements

Factors that affect the decision on joining an aggregation

Determine if an aggregation is right for your situation by considering the following factors. An understanding of how these factors apply to your operation will result in an informed decision. Size of load Load profile Risk tolerance

Internal abilities (or via consulting) Contract length flexibility Contract terms and conditions flexibility Regulatory restrictions

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