STATE SEEKS TO LEVERAGE ELECTRICITY BUYING POWER

Energy Auction to Determine Suppliers of Electricity for State Agencies

BALTIMORE (March 23, 2004) - With a pooled State agency buying power of a projected $65 to $70 million annually for electricity, the Maryland Department of General Services (DGS) today announced it will conduct a unique "reverse" energy auction for the procurement of electricity. DGS is seeking electricity suppliers for State accounts located in the service territories of Baltimore Gas and Electric and Potomac Electric Power Company.

“Using an innovative procurement process, the Department of General Services hopes to leverage the State’s buying power by managing the procurement of this commodity,” said Governor Robert L. Ehrlich, Jr. “With accountability to taxpayers as our top priority, we are optimistic the State will be able to avoid unpredictable and costly electric rate increases.”

In a first for Maryland State government, a "reverse" auction will be conducted on the Internet. The “reverse” auction is the opposite of a traditional auction in which a seller offers an item for sale while potential buyers compete with each other for the purchase. During this process, the price is driven steadily up until no buyer is willing to go any higher. In a “reverse” auction, multiple sellers of products, in this case, a pure commodity - energy, are vying for the business of a single buyer; therefore, the price is driven down. Bidding continues until a pre-established bidding period ends or until no seller is willing to bid any lower, whichever comes first.

“The procurement will allow the State to attempt to mitigate the increasingly high costs for energy, while ensuring the best result is achieved in meeting the State’s electricity needs,” said DGS Secretary Boyd K. Rutherford. “This reverse auction should help‘contain’ some of the escalation in newly deregulated markets.”

With electric deregulation set to begin July 1, 2004, commercial customers - like the State - face the decision of either remaining with their current supplier and paying fluctuating market-based rates for electricity, or choosing a new competitive electric supplier. Energy analysts report on average, newly deregulated energy costs rise about 33 percent. Over the past eight months regulated energy costs are up about 10 percent.

“Maryland's Department of General Services has undertaken a sophisticated approach in the State's newly deregulated electricity market to ensure that Maryland taxpayers are paying the lowest possible rates for their State government's energy,” said Michael T. Richard, Director of the Maryland Energy Administration. “State Government is showing leadership in creating demand for diverse and renewable energy resources through this procurement.”

Auction Dates
An invitation to bid was issued March 10, 2004 to vendors certified by the Public Service Commission seeking proposals, including technical information, company background, and marketing approach due March 23, 2004. Qualified suppliers will be selected and notified by March 26, 2004. Those selected will participate in the "reverse" auction on March 30, 2004. DGS anticipates award of the contract(s) on March 31, 2004.

State Agencies
The winning bidder(s) will provide electricity to State agencies and departments including the Departments of Transportation, General Services, Juvenile Services, Public Safety and Correctional Services, Natural Resources, Maryland State Police, Military, Agriculture, and the District Court of Maryland.

CONTACT:

Dave Humphrey, Public Information Officer
DGS Office of External Affairs
410-767-4652
E-MAIL: Dave.Humphrey@dgs.state.md.us