Department of Defense Saves Money with Electricity Deregulation

Last month, the Defense Energy Support Center (DESC) signed a five-year deal with the Hess Corporation to supply electricity for its 21 agencies in Pennsylvania, New Jersey, and Maryland. Due to deregulation in these states, the DESC is able to purchase blocks of electricity each quarter, locking prices for periods of one to three years.

This new plan allows the DESC to hedge against expected price increases by purchasing 70 percent of expected power in blocks for three years when prices are low and purchasing smaller blocks when the price increases. The other 30 percent will be purchased on the open market, to allow for fluctuations in consumption and to benefit from decreased market prices.

Currently under contract for 10.5 cents per kilowatt hour, Fort Monmouth will save approximately $1.5 million through this restructured contract, taking advantage of the 8.5 cent rate delivered through the restructured market.

While some states like Montana are forcing residents to pay higher electric bills due to state regulated electricity markets, the Department of Defense is seeking to expand this pilot program to all of the 14 states and District of Colombia with deregulated electricity markets.