Governor Patrick Calls for Innovative, cost-saving Energy Management Program for Government Agencies
Commonwealth Energy Solutions will cut state spending on energy by tens of millions through bulk purchasing and sophisticated management
With full participation by cities and towns, the plan has the potential to save taxpayers tens of millions of dollars annually. In the first year alone, the initiative is expected to reduce executive branch energy spending by 5 percent, or approximately $6 million.
"The Commonwealth's state, local, and quasi-public agencies together spend up to $750 million annually on energy," Governor Patrick said. "Putting Massachusetts on a smarter energy budget is one of the ways we're working to make state government more cost-effective and responsive to the citizens of the Commonwealth."
In October, the Governor directed Administration and Finance (A&F) Secretary Jay Gonzalez and Energy and Environmental Affairs (EEA) Secretary Ian Bowles to evaluate the potential for budgetary savings from bulk purchasing, energy efficiency improvements, and sophisticated energy management techniques. Recommendations from that evaluation will be included in the budget proposal later this week.
"The Patrick-Murray Administration has made significant progress in changing the way state government operates in ways that both save money and improve our service delivery system," said Secretary Gonzalez. "This energy reform proposal will allow us to take advantage of our collective public purchasing power to generate real savings for taxpayers."
"Today, we face high and volatile fossil fuel prices, and the Commonwealth should use its power to get the best deals and shape markets for better, cleaner energy choices," said Secretary Bowles. "Our major energy reforms have put efficiency into competition with power sources and established strong mandates for clean energy. Now, the Commonwealth will use its role as the largest power purchaser in New England to maximize opportunities to save money, curb greenhouse gas emissions, and promote clean energy innovation."
With no single entity charged with managing and driving down energy costs for public agencies and facilities, there are now over 15,000 electric, natural gas, and heating oil accounts in the executive branch alone, with total spending of roughly $120 million per year. Higher education and quasi-public agencies bring the Commonwealth's energy spending to $250 million to $300 million per year, and municipal energy costs bring the total public energy bill to roughly $750 million annually.
Only a portion of these purchases currently take advantage of bulk purchasing opportunities in competitive markets for electricity and fuels, and the Commonwealth's utilization of money-saving demand response programs and other energy management techniques is limited. As the region's largest energy user, the Commonwealth is in a position to reap savings from a comprehensive approach to energy management and procurement, as well as drive innovation in energy markets for cheaper, cleaner energy options.
The Governor proposes to create Commonwealth Energy Solutions (CES), a comprehensive energy procurement and management system open to all public entities, including cities and towns. Housed at the Massachusetts Clean Energy Center, CES would perform expert management of energy-related functions for public agencies - similar to the specialized management functions provided to state and local governments by the Pension Reserve Investment Management Board for pension-fund investment and the Group Insurance Commission for public employee health insurance.
As a first step, the Governor's FY11 budget consolidates the energy budget across agencies to enable A&F to centralize fiscal management of energy costs while the CES takes charge of realizing energy cost savings across the executive branch. Local government bodies - cities and towns, housing authorities, school districts, and others - would have the option to procure energy resources under state contracts.
In addition, the Patrick-Murray Administration is investing American Recovery and Reinvestment Act (ARRA) funds to deploy an advanced energy management system for state agencies, which will allow real-time monitoring of energy use and trends. Similar systems have resulted in savings between 10 to 20 percent in other state and local governments and in the private sector, and will provide the new CES with the detailed data necessary to optimize bulk purchasing strategies. The administration is also using $67 million of $185 million in ARRA State Revolving Fund monies for energy efficiency improvements and renewable energy installations in drinking water and wastewater treatment facilities, which make up 30 percent of municipal energy budgets.
These initiatives complement the Patrick-Murray Administration's nation-leading strides in energy efficiency for consumers, including three-year utility energy efficiency plans under the Green Communities Act that will result in $2 billion of energy efficiency investments yielding $6.5 billion in energy bill savings for Massachusetts residents and businesses. Developed by a diverse group of stakeholders over several months, the three-year plans are expected to receive final action by the Department of Public Utilities this week.