Maryland saves millions on reverse auction

Maryland’s Department of General Services recently saved more than $7 million on an electricity supply contract it awarded through an online auction.

The state tapped World Energy Exchange, a Worcester, Mass., company, to run the electronic procurement. World Energy conducts reverse auctions, in which multiple sellers submit bids to supply a commodity specified by the buyer. In Maryland, the savings stem from the cost differential between the bids obtained through the online energy auction and the published utility rates in various Maryland service territories, according to World Energy.

A number of state and local governments use World Energy’s reverse auctions, with the company serving as prime or subcontractor. “Government is a large segment of our business,” said Phil Adams, World Energy’s chief operating officer.

The company’s government thrust started about six years ago when it partnered with Science Applications International Corp. to capture an energy auction services contract with the General Services Administration. Since then, the company has provided energy procurement services to Maryland, the District of Columbia, Massachusetts, and Montgomery County, Md. World Energy also recently won a contract to broker energy commodities for Pennsylvania, Adams said.

To date, World Energy has mainly brokered electricity, but the company has also conducted large-scale natural gas reverse auctions for GSA’s Natural Gas Acquisition Program. In addition to electricity and natural gas, the company’s Pennsylvania contract involves diesel, unleaded gas and heating oil.

“We’ve started to branch out into other energy commodities,” Adams said.