City hears options for electricity supply as contract nears December expiry

CQI Associates told the Taneytown mayor and city council on July 14 that the city's electricity supply contract, which runs through December, should be handled cautiously amid volatile market conditions and recent capacity and transmission price spikes.

"What we're gonna be talking about is your electricity contract that's coming due in December," Richard Anderson of CQI Associates said as he began the presentation. Anderson recommended an "energy-only" approach for an 18- to 24-month term, with the option to convert to an all-in fixed price later if market conditions improved.

Anderson said the city uses about 3,192,000 kilowatt-hours a year and that the supply portion of the current contract equates to about $239,777 annually; delivery charges to Potomac Edison (Pepco) add roughly $100,000, and taxes and fees add about $39,000. He noted the city could instead return to Potomac Edison's standard offer service, which the presentation lists at 0.1021 per kilowatt-hour through May 2026, producing a roughly $310,000 all-in bill if the city declined a competitive contract.

CQI presented pricing from five suppliers (Hudson Energy, Constellation, Direct Energy, NRG and others) across terms of 12, 18, 24, 30 and 36 months and compared two approaches: (1) all-in fixed price (locking supply, capacity and transmission into the price) and (2) energy-only (fixing only the energy/kWh component and passing capacity and transmission as pass-throughs). Anderson warned the council that PJM's recent capacity/transmission adjustments increased that portion of bills substantially this June, and that legislative and market uncertainty made long-term locking potentially risky.

Anderson summarized the tradeoffs: shorter terms limit the risk of locking in a high rate if market relief arrives; longer fixed terms provide budget certainty but can lock in prices that may be above future market levels. He recommended energy-only for 18 to 24 months, noting that if the market softened the city could convert the remaining term to an all-in fixed price later. "My recommendation is to do something energy only, looking at 18 to 24 months, and let's come back and revisit this," Anderson said.

Council members questioned forward-price assumptions and whether the forward NYMEX pricing and PJM auction results would reliably predict price moves. Councilors pressed CQI on the role of the wastewater treatment plant in lowering average unit costs (the plant accounts for roughly 500,000 kWh of the city's load and provides steady capacity value) and on the timing for a final decision.

Council and staff agreed to receive updated pricing and graphics at an August workshop so members could review the latest forward rates and auction results before authorizing a contract. Anderson said the city's last realistic sign date to meet December meter reads would be Oct. 10 but that the consultant planned to keep council and the city manager updated if conditions changed earlier.

The presentation also referenced the Taneytown Chamber of Commerce Energy Purchasing Cooperative program as background to the city's procurement history and noted that delivery fees are regulated by Potomac Edison and taxes/fees are regulated by the Public Service Commission; the competitively bid portion is the supply contract.

No formal motion or vote on a supply contract was taken during the meeting; the matter was left for further review and an August follow-up.

Richard Anderson introduced himself near the end of the presentation as a principal at CQI Associates and said his firm has worked with the city since deregulation began. City staff (including the city manager and public works staff) will review quarterly billing detail and provide updated graphics before the August session.

Next steps: council asked staff to bring updated supplier quotes and PJM auction results to the August workshop for further deliberation; the city's consultant flagged Oct. 10 as a practical internal deadline to sign a contract to meet December meter reads if the council chooses to execute a new arrangement.