Plan to let businesses pool energy purchases

Small businesses in Boston, which have seen their profits eroded by escalating energy costs, could save between 20 percent and 40 percent through a plan city officials proposed yesterday to pool natural gas and electricity purchases.

At least 200 small businesses would have to sign up for the energy pool before the city could start the process of buying energy in bulk at a reduced cost, said Evelyn Friedman, director of the Department of Neighborhood Development.

"Energy costs are rising at the same time many other costs are rising for small businesses," said Friedman. "We're just the city, but we want to do whatever we can to support small businesses in our community."

The Massachusetts Health and Educational Facilities Authority has a similar energy-buying program that helps nonprofits obtain low-cost fuel, but an energy efficiency advocate said she is not aware of a municipality taking on the task.

"For a large city, it's a good idea," said Susan Coakley, executive director of Northeast Energy Efficiency Partnerships, a nonprofit public policy organization in Lexington. "There's little we can do to control energy prices. At least we can help them buy and lock in rates through longer-term contracts. It will at least reduce the risk, so they'll know what their cost is over time."

It is the second time in three years that Mayor Thomas M. Menino has proposed harnessing the city's buying power to reduce energy costs. In 2005, Menino proposed establishing a citywide electricity co-op to reduce energy costs for residents. After several months of study, city officials determined the idea was not practical because a co-op would be costly to run and would not significantly reduce costs for individual residents.

Friedman said the small-business energy pool is based on a program she used to reduce energy costs at rental properties when she was executive director of Nuestra Comunidad, a Roxbury community development agency. Most large businesses already pay reduced energy costs through bulk purchasing, but smaller businesses do not have the same leverage, city officials and advocates said.

Small businesses who sign up for the program would still pay their gas and electricity bills to National Grid and NStar, whose charges for the delivery of energy would remain unchanged. But the amount the businesses pay for the energy itself would be lower, because the partnership would negotiate lower prices directly through the market, using a broker, according to the Department of Neighborhood Development.

The city would not pay anything on an ongoing basis to run the energy-buying program. Instead, the city plans to enlist an energy broker who would collect fees from businesses for negotiating lower prices.

Assuming the city signs up 200 businesses, the program should be up and running within two months, Friedman said.

The city floated the idea to a group of restaurant owners last month, who are among the small businesses that use the most energy, and determined there was enough interest to launch the plan, Friedman said.

John C. Drake can be reached at jdrake@globe.com.