Maryland's Department of General Services (DGS) will realize more than US$7 million in savings by having procured electricity through an online energy auction. This is the fourth time the DGS has used the World Energy Exchange reverse online energy auction to purchase electricity for state-operated facilities.

Savings are a measure of cost avoidance realized through the online auction compared to the published utility rates in various Maryland service territories. In the most recent DGS auction, contracts for supply — valued at $78.2 million — were awarded within one hour of the auction's end.

“World Energy was able to accurately project the Maryland rates prior to the auction and this gave us a leg up,” observed Carl LaVerghetta, director of procurement for the Maryland DGS. “We had a good idea of what the price to beat should be before the auction began.”

And, LaVerghetta added, “We beat the price to beat in almost every instance.”

World Energy actually ran 27 events, including by geography and by load factor, so that the DGS could get the best possible outcome. The DGS received 135 bids from six prequalified suppliers, all in a matter of two days.

“World Energy has a proprietary software that links in real time with all of the Wall Street indices,” LaVerghetta noted. “No other company has what they have to offer.” The DGS recently signed another three-year agreement with World Energy.

World Energy has put a great deal of effort into the design of its auction. “We believe the structure we've chosen, which happens to be the eBay model where it's an English auction up to a certain point, then a best and final bid at the closing time, maximizes the consumer benefit,” explained Philip Adams, COO of World Energy.

However, Adams pointed out that suppliers benefit from these auctions as well. World Energy brings suppliers deals they might not otherwise get to bid on, which is what suppliers told World Energy in a recent survey. To work with World Energy, suppliers must be registered with their local public utility commissions, and before they can bid on a particular auction, they are required to sign a terms and conditions agreement specific to that auction.

In 2005, the state of Maryland received prestigious awards for its use of the reverse energy auction that was conducted using the World Energy Exchange.