Bill Callahan's Cleveland Diary details risk of regional buying... NOPEC natural gas will be 33% higher than Dominion

Submitted by Norm Roulet on Thu, 12/28/2006 - 20:21.

Cleveland Vision's Bill Callahan hosts a remarkably insightful blog called Cleveland Diary where he digs deeper into fascinating regional economic issues than anyone else on Earth, in a very precise and reputable way. Today, he posted a fasinating revelation that "NOPEC natural gas will be 33% higher than Dominion East Ohio next month", because "Dominion’s current residential rate of $12.49 per mcf will fall to around $9.90 starting in mid-January" while "the rate charged by the Northeast Ohio Public Energy Council (NOPEC) — at $12.68, already higher than East Ohio’s — is going up next month to around $13.13." He goes on to point out, "So tens of thousands of residents of Cleveland and other NE Ohio cities who were automatically “opted in” to the NOPEC supply deal last Spring by our cities, and didn’t go to the trouble to opt out — either because they believed in the promised savings, or weren’t sure what to think, or just didn’t understand the system at all — will now be paying 33% more for NOPEC gas than they’d be paying as Dominion East Ohio customers." Well, by some stroke of luck, I'm still a Dominion customer... I sure didn't understand the system at all.

You must visit Cleveland Diary to read the whole story and see an excellent chart Bill prepared comparing gas prices from NOPEC vs. Dominion over the past year. NOPEC is explained on their website as "made up of 118 member communities, large and small, spread across eight Northeast Ohio counties. Voters in each of these communities approved the formation of NOPEC in November, 2000, by passing ordinances that authorized their local government to aggregate all utility customers within the community."

"The concept of NOPEC is a simple one. By banding together into one large buying group, the communities gain leverage in the deregulated marketplace. The individual utility customers NOPEC represents enjoy the advantages of bulk buying power, professional expertise, and consumer advocacy on their behalf. With more than 600,000 potential customers, NOPEC is the largest public aggregation in the United States."

As Bill points out, this strategy has dramatically failed. It is important to recognize this failure as leadership of our region pursues to "regionalize" everything here. In principle, it makes sense that, like WalMart, a bigger buyer has the power to drive better deals for customers. Unfortunately, that assumption requires a real "professional expertise" - a smart buyer - which is the case with WalMart and clearly is not with NOPEC - they got screwed and so screwed 100,000s of people of the region.

In what instance do you expect some smart buyer will surface in this region, with real "professional expertise", who will then drive great deals for aggregated consumers? I can't imagine that happening, under any such regional circumstances. We will not have WalMart-like pursuits of sole-source, mine-mouth, ingeniously structured agreements managed with ferocious business-like self-interest, but rather more-bloated-than-usual, pork barrel statehouse lobbyist corrupted team player deals like we now see costing regionalized consumers 33% more than they would pay in the free-market, now subsidized in their competition against regionalism.

Thanks for this insight, Bill.