Surge of interest in LaGrange Park electricity choice
Updated: May 14, 2012 1:47AM
As LaGrange Park moves toward a March 20 referendum on electrical aggregation, the big question remains: will aggregation save residents money on their electrical bills?
The answer is “maybe.”
So says Jim Chilsen, spokesman for the Citizens Utility Board, a consumer watchdog group that fights for the interests of electric, natural gas and telecommunication consumers in Illinois.
The LaGrange Park referendum proposal seeks voter approval for the village to pool, or aggregate, the electric load of its residents to buy electricity on their behalf, similar to the way the village negotiates for garbage and cable services for the entire community.
“This gives our residents an option. ComEd has always been the one that supplied it,” said Village President Jim Discipio. “Now the cost has become competitive with deregulation.”
Electrical aggregation started in Massachusetts and Ohio in the late 1990s. It was approved for Illinois in 2007 and has been approved by 19 communities in the state, according to the Illinois Commerce Commission.
Last year marked the first in which communities could seek lower rates on behalf of their citizens and small businesses, defined as those consuming less than 100 kilowatt hours of power during peak periods.
The law allows communities to create voluntary “opt-in” programs without seeking residents’ permission. But municipalities must first hold a referendum to create a program that automatically enrolls all eligible customers unless they choose otherwise. That strategy gives governments more bargaining power with sellers.
Even if voters authorize the village to seek bids, residents can still opt out of the aggregation program; in fact, consumers can already choose their own provider.
The potential savings for customers are big. In December, ComEd’s residential electric rate was 7.73 cents per kilowatt hour, while the lowest alternate rates won by communities with existing aggregation programs is 5.43 cents per kilowatt hour, a 30 percent saving.
LaGrange Park officials estimated residents could save $125 to $175 a year at least until ComEd rates could change its rates after the first year.
“Today’s dollar is getting slimmer and slimmer, and if we can help that stretch a little bit more, that’s what residents expect from the Village Board,” Discipio said.
If voters approve the proposal, the village would hold public hearings to provide residents with information on the process of electrical aggregation and their options, said Emily Rodman, assistant village manager. Feedback also would be solicited from residents on what type of supplier or specifications they would like the village to consider. The village will publicize information on the hearings on the village website and electronic newsletter.
Following the hearings, bids would be solicited from electricity suppliers in June, and new rates could take effect by September 2012.
In December, village officials talked with but made no commitment to the Northern Illinois Municipal Electric Collaborative, a private firm functioning as a matchmaker. The firm solicits bids from electrical power suppliers competing with ComEd for a contract from municipalities with a large block of residential and small business customers.
Sharon Durling, a representative of the firm, said the firm’s fee is included on the rate negotiated with suppliers, and it won’t be charged directly to consumers.
There are 275 cities, villages and counties in Illinois that have put electrical aggregation on the ballot.
“The idea is that there is strength in numbers,” Chilsen said. “Having thousands of residents gives you some bargaining power.”
To be clear, only the supply of electricity would be subject to competition. ComEd would continue to hold a monopoly on distribution – getting the electricity from supplier to resident – and transmission – getting electricity from its source to ComEd.
“Supply costs take about two-thirds of the bill,” Chilsen said. “Delivery costs is one-third.
“When ComEd gets a rate hike, it’s on the delivery charges.”
In the short term, residents in communities that have approved electrical aggregation have seen a decrease in their electric bills, Chilsen said.
“It would be wrong to assume that’s a permanent situation,” Chilsen said. “ComEd has been locked into some long-term contracts (with suppliers). Those are set to expire in May 2013.”
While the price ComEd was paying when it signed the contracts was good, prices have since dropped. That’s allowed alternative suppliers to offer “slightly better prices,” Chilsen said.
“There is the potential for ComEd rates to go down significantly (when its contracts expire),” Chilsen said.
So local governments should do two things, Chilsen advises. First, keep an eye on what ComEd is charging for electrical supply.
Second, before signing a contract with an alternative electrical supplier, find out if there is a charge for ending the agreement.
“If a company is not charging an exit fee, that’s a nice thing to rely on if ComEd prices suddenly go south,” Chilsen said.
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