UPDATE: Boro Looking for Big Savings in New Power Pact

The Madison Borough Council has given authorization to a third party to purchase electricity for the borough, part of a plan that could save the borough up to 20 percent compared with its current electric bill.

Borough Councilman Vincent Esposito, who serves as head of the municipal utilities committee, disclosed plans for the new agreement at the governing body's scheduled meeting earlier this week.

Esposito said the planned contract with American Power Net could result in substantial savings compared to the current agreement with Constellation Energy.

Madison purchases more than 10 million kilowatt hours of electricity a month at a cost of approximately 12.5 cents per kilowatt hour. Exact pricing has yet to be discussed with APN and no purchases have been made, but borough officials expect that power bought under contracts for delivery after June 30, 2014—when the Constellation deal expires— could cost up to 20 percent less than current rates.

The much-discussed contract with Constellation began June 1, 2009. It provided for locked-in rates over the life of the deal, which protected the borough against possible future price hikes but did not allow Madison to take advantage if energy prices fell.

The new contract is just between Madison and APN. Four members of the Power Purchase Association of New Jersey—municipalities with their own electric utilities—currently have a contract with APN that runs through May 31, 2012. They are South River, Park Ridge, Lavalette and Seaside Heights. Four more municipalities in the PPANJ are working on new contracts with APN. They are Madison, Butler, Pemberton and Milltown.

Changes in state law may also benefit the borough electric utility. Proposed legislation would permit the creation of a “Municipal Shared Services Energy Company,” allowing municipalities such as Madison that operate retail electric distribution systems to band together to create an energy company.

The company would have the authority to jointly develop production, distribution and transmission of electric power as well as enter into purchase agreements and act as an energy portfolio manager, similar to what APN will be providing to the borough.