Electricity Procurement—Reverse Auction
Electricity Auction Procurement
U.S. General Services Administration, 2002
On January 1, 2002, the state of Texas deregulated its electric industry. GSA’s Greater Southwest Region adopted an innovative, proactive approach to addressing the challenges of deregulation and formed a team to investigate the many issues involved in meeting the Region’s power requirements in a deregulated environment. The team ultimately settled on an electronic “reverse auction” procurement to meet the Region’s needs. The electronic reverse auction is a process similar to the popular “Ebay” auction model, but in reverse, as the bids submitted are consecutively reduced by competitive bids, until the auction closes.
In the solicitation for the reverse auction, GSA requested pricing for its electric power load of approximately 142 million kWh per year for 82 buildings of various sizes located throughout the state of Texas. The region asked for pricing based one, two, and three-year contract terms, and separate pricing for supplying five percent “green” power, as defined in Executive Order 13123.
The region completed the reverse auction and signed contracts two days later, for three-year terms in all four service areas. These contracts save the region 23 percent over its previous cost of electric power for the state of Texas. This equates to projected savings to the government of $6.7 million over the three-year contract term. In three of the service areas, the awards included the five percent green power component. This procurement puts the Greater Southwest Region well ahead of its timetable and target goals for “greening the government” as provided for in the Executive Orders. The region is now poised to react quickly as each of the four states in the region deregulate utilities, as well as assist other agencies procuring utility services in a deregulated market.
Another benefit for the region, the solicitation contained language that allows the savings realized from this “supply side” procurement to be “captured” and used in the region for energy conservation projects, to generate even more savings in the future, as provided for in the Energy Policy Act of 1992 and as directed by Executive Order 13123.
For more information, contact Mr. Kevin Myles at (817) 978-9942 or via e-mail at kevin.myles@gsa.gov
