HARRISBURG – Gov. Edward G. Rendell said taxpayers will save nearly $1 million through a “reverse auction” that pitted natural gas suppliers against each other to give the commonwealth the best price as they competed last month to sell their fuel to the state.
“By locking in our price now for the next two years, we are reducing our exposure to market volatility and fluctuating prices that have impacted natural gas consumers in the past while providing a consistent and adequate supply of energy over the next few years,” the governor said.
“Over the last four years, we’ve taken a business-like approach to operating state government—improving the delivery of services while operating in a more efficient manner. We’ve applied smart business practices to our operations and realized substantial savings that are then redirected to taxpayers.
“This reverse auction is just one example of that approach. By turning the tables on suppliers, we’re able to secure a more competitive price on our natural gas purchases. Having these providers compete to outbid one another creates a buyer’s market that puts the state in the driver’s seat to get the best deal for taxpayers”.
The energy savings were achieved through a series of online reverse auctions last month where the state secured several natural gas contracts for 12- and 24-month periods. The deals are expected to save the commonwealth at least $928,000 on its projected bills over those periods.
The state bought a combined total of approximately 818 decatherms of natural gas that will be used by state-owned buildings and facilities across the commonwealth.
A reverse online auction uses Internet-based technology to bring together buyers and sellers that then compete to sell a particular product at the lowest-possible price. Suppliers compete against each other in real-time to win a contract. The results of a reverse auction can prove more beneficial than using traditional negotiations.
The natural gas buy was coordinated through World Energy, a company that combines state-of-the-art reverse-auction technology, the broadest network of trading partners and the deepest store of market intelligence to secure the most attractive prices available in the energy market.
Through fiscal year 2005-06, Rendell has successfully generated $841 million in recurring savings for the commonwealth’s taxpayers through a series of measures that include smart buying in the procurement of goods and services, cutting the state vehicle fleet by more than 1,000 vehicles, and cutting energy consumption in state office buildings.
The administration expects annual savings to exceed $1 billion in the 2006-07 fiscal year.