Northeast fuel distributor Gulf Oil LP plans to open a new division that will buy electricity and resell it in deregulated markets in which customers can shop for power suppliers.
The Framingham company said it will launch its Gulf Electricity service in Connecticut in March, but expects to expand into Massachusetts in about a year, and ultimately nationwide. Utility deregulation rules make it possible for Massachusetts and Connecticut customers to choose between a default electricity supplier or competing firms to get the best price. Utilities such as NStar and National Grid deliver the power, passing the suppliers’ costs to customers, and charging their own distribution and transmission fees.
Gulf will operate the service much as it does in the fuel business, buying energy on the wholesale market, marking it up, and selling it to consumers.
Joe Petrowski, chief executive of Gulf’s parent company, Cumberland Gulf Group, said the company decided to launch its electricity business in Connecticut because the state has a proven market. Roughly 40 percent of Connecticut’s 1.5 million customers already get their power from competitive suppliers, according to the state’s Department of Energy and Environmental Protection.
“It’s a crowded field, but we think the brand recognition of Gulf will give people some comfort and we want Gulf to be associated with more than just petroleum products,’’ Petrowski said. “We’re looking to diversify into all fuels and fuel types.’’
Gulf is still firming up the details about how the service will work, but Petrowski said the company will buy power on electricity markets and charge customers a “floating price’’ based on wholesale costs at the time of purchases. Gulf estimates it could save consumers as much as 15 percent on monthly electricity supply charges. The company probably will offer fixed-price contracts in the future.
“If we can get a thousand customers signed up, that will pretty much cover our overhead,’’ Petrowski said, adding that, down the line, the company hopes to build a customer baseof at least 10,000 to 15,000 in the Northeast.
In Massachusetts, only about 15 percent of the state’s 2.7 million customers buy their electricity from a competitive supplier, according to the state’s Executive Office of Energy and Environmental Affairs. In December, just over 197,000 residential NStar customers and nearly 115,000 National Grid customers used competitive suppliers, the utilities said.
Whether customers choose to get their electricity from the default service or through another firm doesn’t really affect the state’s utilities, which serve only as energy delivery companies.
National Grid officials said Gulf’s presence in the competitive supply market could be “great news’’ for customers, but encouraged them to compare costs before making any switch.
“This means customers have a choice of who provides their power supply, which could ultimately mean lower electricity costs,’’ said Deborah Drew, a spokeswoman for National Grid.
While Petrowski said Gulf doesn’t expect its electricity business to be an immediate money-maker, the company believes its needs to expand beyond petroleum fuels and into other energy markets.
Its business, which includes supplying gasoline, diesel, jet fuel, heating oil, and kerosene, is under pressure from falling natural gas prices and increasing vehicle mileage standards, Petrowski said. In Massachusetts, Petrowksi said, added, “we could see as much as a 20 percent decline in petroleum usage in the next seven years.’’
“If you’re building your future entirely on $100 petroleum, it’s a shaky future,’’ he said, and Gulf is already thinking about branching out into other fuels, such as natural gas. “Transport fuels will be at the center of our business, but I really think it’s [also] going to be providing energy for your home or your business.’’Erin Ailworth can be reached at email@example.com. Follow her on Twitter @ailworth.