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| Vol. 25, No. 3 |
| February 15, 2003 |
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Texas Medical Center Institutions “Team Up” to Reduce Electrical Costs Customer choice in electricity purchasing is not only alive and well, but flourishing here in the Texas Medical Center. Six TMC institutions cut their collective electricity costs by 25 percent, or $4.6 million last year, when they joined together to form an aggregation group that collectively purchases electricity and thus has more leverage to bargain. The Texas Medical Center Electric Aggregation Group was formed in the fall of 2001, and includes Baylor College of Medicine, Texas Children’s Hospital, the Texas Medical Center, Texas Medical Center Central Heating and Cooling Services Cooperative Association, known as TECO, the Texas Medical Center Laundry Cooperative Association and TIRR Systems. Lending new meaning to the old adage “there’s power in numbers,” the group leveraged its considerable buying power to procure electricity at the lowest price and best contract terms. The Texas Medical Center Aggregation Group is actively seeking other TMC member institutions to join the group, which is open to all TMC member institutions. Customer choice provides most Texas consumers – both individuals and corporations – with the option of buying electricity from the retail electric provider of their choice. Everything is negotiable: price, terms and conditions. Only a few areas in Texas have not yet benefited from this option, including the region of East Texas that is north and east of Houston, the Panhandle area, and a section of west Texas in and around El Paso. This new way of purchasing electricity is especially attractive to institutions who team together to secure the best possible deal. “A diverse group of institutions can combine or ‘aggregate’ all their various facilities such as hospitals, clinics, and offices to achieve prices and contract terms once reserved for only the largest, most sophisticated energy consumers,” said Jeffry Pollock, an advisor to the Texas Medical Center Aggregation Group. “The contract may be just as important as the price,” advised Stephanie Kroger, an attorney who assisted the Texas Medical Center Electric Aggregation Group during contract negotiations. “Some other contracts allow new or increased market charges and fees to be passed through to the customer. When this happens, even a fixed price may not be fixed for long.” Besides the array of new charges and fees, many contracts also require customers to accurately predict their future monthly electricity usage. Individual customers are at greater risk because they are more likely to experience significant variations between projected and actual monthly usage than a larger, more diverse group of customers. Most suppliers will charge for these “imbalances,” either as a higher price or as extra “bandwidth” charges. “Aggregation can lessen this risk,” said Pollock, “because the larger size of an aggregation group provides a wider margin of forecast error. As long as there is some diversity between the participants’ loads, the odds are that even if one participant misses its projection, others have also missed theirs, but in the opposite direction.” These benefits will grow as the Texas Medical Center Electric Aggregation Group grows. New members and increased load will enhance the group’s already considerable buying power, while further reducing the risk to both existing and new members. “Clearly, there is much more involved than writing a check to a regulated utility,” said Larry Null, president of TECO. “In today’s new competitive retail market, buying electricity has become a specialized part of facility operations. By forming the aggregation group, we can retain electricity-purchasing specialists to be our equalizer in the marketplace and allow the group members to focus their efforts on doing what they do best – health care, research and education.” Rock Morille, director of facility services at Baylor College of Medicine, agreed. “As a member of the Texas Medical Center Aggregation Group, we can retain the specialized expertise needed at a fraction of the cost.” The ability to choose an electricity supplier demonstrates that “the free market is alive and well,” said Andy Icken, Texas Medical Center executive vice president. The Texas Medical Center Electric Aggregation Group is actively seeking other TMC member institutions. For more information, contact Andy Icken at aicken@texmedctr.tmc.edu or Larry Null at LNull@teco.uth.tmc.edu.
©2006 Texas Medical Center E-Mail: tmcinfo@texmedctr.tmc.edu URL: http://www.tmc.edu/tmcnews/02_15_03/page_04.html |