An increasing number of small businesses, nonprofits and community groups are banding together to negotiate lower electricity prices, using their collective purchasing power as leverage with energy providers.
The organizations can then reinvest that savings — thousands of dollars a year in some cases — into their corporate or social mission at a time when the lackluster economy has put a strain on most budgets.
Shoring up that money and converting organizations to clean energy has become a point of focus for District-based Groundswell. The nonprofit has negotiated reduced prices on renewable energy for three cohorts of community and religious institutions in the past year.
The latest purchase, which closed last week, counted 103 groups from across Maryland and the District — more than twice the number that participated in the previous round. The Georgetown Presbyterian Church, Cesar Chavez Public Charter Schools for Public Policy and the NAACP were among the groups that took part.
Clean energy “wasn’t cost viable for community institutions so our idea to push for aggregation was actually an innovation to try to figure out how can we make clean energy work while delivering an economic benefit,” co-founder Will Byrne said.
Big corporations, universities and other large institutions with a network of properties have long negotiated for more competitive energy rates. Their size alone gives them greater sway with suppliers that want to retain their business.
But smaller organizations, when taken individually, don’t have the same leverage. As a result, many of them view electricity costs as an expense that they can only control with the flick of a light switch.
“We’ve found largely that the psychology between a resident and a small-business owner is very comparable,” Byrne said. “It’s not intuitive for these people that they even have an option.”
Groundswell knits together a group of community institutions and assesses their aggregate energy needs. It then collects bids from energy suppliers who can offer competitive rates and often hire from within the local community.
The nonprofit’s second purchase agreement saved 38 organizations a total of $215,000 on their annual energy bills, an average cost reduction of 12 percent.
The owners of Ben’s Chili Bowl signed a multi-year clean energy contract in 2007 along with about 10 other city businesses. Kamal Ali said the iconic eatery has seen lower electricity bills as a result and now boasts that it is “100 percent wind powered” on the restaurant’s Web site.
“Sometimes by being a part of a local group it’s helpful to bring these kind of things to bear,” Ali said. “As a small businessperson, sometimes you don’t have the time or energy.”
They aren’t the only company making the switch.
Pepco delivers energy to customers in the District and suburban Maryland and bills them on behalf of suppliers. The company negotiates a standard energy rate every six months, but customers can opt out and pursue their own contract with suppliers.
“We are seeing a detectable trend of small businesses moving to third-party suppliers,” said spokeswoman Mary-Beth Hutchinson. “There’s no way for us to tell whether that is through an aggregator or as an individual, but overall there is a detectable trend.”
The burgeoning interest in group purchasing has in turn created a viable market segment for energy suppliers that was once difficult to capture, said Gary Skulnik, the co-founder and president of Clean Currents.
The Rockville-based wind and solar power purveyor has won two contracts with Groundswell in the past year, and inked the contract with Ben’s Chili Bowl and the other city establishments back in 2007.
“The buying groups are an important part of our sales and marketing strategy,” Skulnik said. “It is really one of the things that we do focus on because we don’t have the type of resources to buy radio and TV ads the way some companies do.”
“Clearly the financial benefit for us is we get a large group of customers without having to sell them one on one, so we do get savings on that and we’re able to pass that on in lower rates.”
Total amount saved by 38 companies that participated in a year-long purchase last year. On average, each saved 12 percent from their previous costs.