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The Delaware River Port Authority currently pays around $8 million each year in electricity bills. Seeking to control this rapidly growing cost, the agency announced plans last week to conduct a "reverse auction" for electricity providers.
Under a normal auction, a seller offers a product and buyers bid more to win the product or service. However, when the service is plentiful with multiple providers, as with electricity, major customers can conduct a reverse auction in which sellers attempt to win a major contract by offering a lower price.
DRPA hopes that this process could help it find an electricity supplier willing to offer rates somewhere between 7.5 and 8.5 cents per kilowatt-hour, between 1 and 2 cents per kilowatt-hour below Delaware's average industrial rate through July of this year, according to the U.S. Energy Information Administration.
"The high end would be 8.5 cents. Even at 8.5 cents, that would trim $300,000 off our cost," Phil Spinelli, project manager at the Port Authority Transit Corporation, told reporters.
The Economist notes that a growing number of companies have turned to reverse auctions and automatic purchasing processes as a way to take the negotiation and sales aspect out of the purchasing.