WORCESTER — With electricity costs expected to skyrocket this winter as inflation climbs, OPEC cuts the oil supply and the war in Ukraine continues, Worcester renewed a contract with an energy company that will lower bills for some customers, according to a city press release.

The reduced costs are compared to prices offered by National Grid, the city's electricity supplier.

In addition, the new contract will reduce the city’s reliance on fossil fuels for energy.

The contract is with Houston-based Direct Energy and prices in the Standard Green category start at 25.632 cents per kilowatt hour from December to July 2023.

Prices will fall to 16.912 cents per kilowatt hour from July 2023 to the end of the year.

That compares to 33.891 cents per kilowatt hour through April 2023 in National Grid’s upcoming residential Basic Service.

Comparing prices, the average customer that gets its energy from Direct Energy can expect a $42.50 monthly savings, according to city officials. The savings is based on the average customer using 515 kilowatt hours monthly between December and July 2023.

Expected savings are not guaranteed beyond April 2023 because National Grid’s prices will change in May. Those prices are unknown.

More savings

Meanwhile, for those in the program's 100% Green electricity option, prices start at 27.491 cents per kilowatt hour from December to July 2023.

Prices fall to 18.763 cents per kilowatt hour from July through the end of 2023.

Worcester residents and businesses enrolled in the program are expected to save nearly $19 million, compared to National Grid’s prices this winter.

That's on top of the $1.2 million saved since the program launched in early 2020.

As of June, 39,041 residential, 6,289 commercial and 181 industrial accounts were enrolled in the city's Direct Energy program.

Reduction in fossil fuels

For those enrolled in the program, more than half of the electricity will come from renewable energy generated in the New England region, according to city officials. The calculation includes 22% required by state law and 30% in the new contract.

The renewable energy added to Worcester’s electricity supply is equivalent to removing 5,000 cars from the road or eliminating electricity use for more than 16,000 homes over the one-year contract, said city officials.

Electricity aggregation

This term applies to the contract with Direct Energy. The company buys electricity in bulk on behalf of its customers, resulting in lower costs.

More than 150 Massachusetts communities reportedly get their electricity through similar aggregation arrangements. State approval is required and the process can result in delays.

So, while Direct Energy supplies the electricity, it’s still National Grid that delivers it.

The new 12-month electricity-supply contract covers 2023 and renews the contract signed with Direct Energy in 2019.

While the expiring contract kept prices low during spikes in electricity rates nationally, city officials said Direct Energy prices will rise to market levels in December, when the new contract starts.

However, the new prices will be lower, compared to National Grid Basic Service prices that run from November through April 2023, said city officials.

Customers enrolled in the prior contract will automatically enter the new one, but can opt out at any time with no fee or penalty.

Visit GreenWorcesterElectricity.com for more information about the city’s aggregation program.

Contact Henry Schwan at henry.schwan@telegram.com. Follow him on Twitter @henrytelegram

This article originally appeared on Telegram & Gazette: Direct Energy contract with Worcester means cheaper electricity