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Town Extends Electricity Contract

August 4, 2011 by Josh Morgan

The Town of Cheshire extended its electricity purchase contract for one more year until 2015, a move that should save it more than $20,000 annually.
The initial contract was set to expire in December 2014, but by readjusting the rate and extending the deal for another year, the Town was able to save money. The deal between the Town and TransCanada Power Marketing Ltd. was initially signed in February 2007 and was later amended in April 2009. The new rates go into effect on Sept. 1, and expire on Dec. 1, 2015.
"We locked into a rate and took advantage of historically low prices," explained Finance Director Jim Jaskot. "We realized a better rate."
The Cheshire Town Council began discussing the possibility of lowering what it pays for electricity earlier this year during debate on the Operating Budget. By working with the Town's consultant, CCM Energy, it was determined that the Town could receive a lower rate. To do so, however, would mean adjusting the contract and extending the term. The Council has adjusted contracts before, for electricity and natural gas, Town Manager Michael Milone explained.
The Council was presented with two options for a one-year or two-year extension. The Town currently pays 9.485 cents per kilowatt hour. TransCanada is currently bidding rates at 7.87 cents per kilowatt hour. However, the Town could not take advantage of that price until 2014. A decision was made to "blend" the rates to yield a 9.145 cent per kilowatt hour charge that would take effect sooner. The Town Council could have taken a two-year extension, which would have lowered the rate further, but felt uncomfortable extending the contract until 2016. The savings will be roughly $22,500 a year and $94,000 over the remaining 51 months of the contract.
"It's good to know your costs going forward," Jaskot explained, noting how it provides some certainty in uncertain budget years.
The Town Council unanimously approved the new contract with the blended rate on July 12.
In a memo from John Shortsleeve from Bay State Consultants, the recommendation was for the Town to blend the rates or take a reduced rate from 2014-2015. The Town could have saved $105,000 in 2014-2015 contract year, according to Shortsleeve. The Town chose to save $94,000 over the next 51 months, instead.
"We are currently in an unusually favorable market for long term contracting. We don't know how long this market will last," the memo states. "We recommend locking in these prices."

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