By Steve Daniels March 09, 2014
Residential electric bills in Chicago will increase roughly 14 to 18 percent in June under a new deal the city has struck with its power supplier, Integrys Energy Services.
That follows an increase in January thanks to higher delivery charges by Commonwealth Edison Co.
But, despite the significant increase to come, the city predicts customers will continue to save modestly over the even-higher power supply rates they expect ComEd to charge beginning in June. Electric bills are divided between charges for delivery, which is handled by ComEd, and supply, which can be done by ComEd or other companies.
The city struck its new deal last week with Chicago-based Integrys, which currently provides electricity to 720,000 Chicago households and small businesses. Rates will rise about 14 percent for units in multifamily buildings and 18 percent for single-family homes. The pact runs through May 2015.
Under the new deal, Chicagoans’ electric bills will change in important ways. Integrys has committed to a fixed energy price of 5.3 cents per kilowatt-hour. But, unlike its current price in Chicago of 5.59 cents, the new per-kilowatt-hour rate won’t include the cost of guaranteeing that electricity will be available from power plants during the highest-demand periods of the year nor the cost of transporting the juice over high-voltage lines from the power plants to ComEd’s local distribution grid.
Those extra costs, which all customers throughout the regional grid including ComEd’s territory must pay, are increasing significantly beginning in June. Under the new deal, Integrys will impose a fixed monthly charge on customers regardless of how much electricity they consume. Single-family households will pay $22.36 per month while units in multifamily buildings will pay $9.06.
The effective energy price (which does not include ComEd’s delivery charges) for apartment and condo dwellers should be about 7 cents per kilowatt-hour and 7.4 cents or so for single-family households, a city official said. That’s a 25 percent to 32 percent increase on the energy portion of the bill over current costs.
The city forecasts that ComEd’s effective price will be around 7.7 cents when it resets in June. The Illinois Power Agency, a state agency that buys power on behalf of utility customers, plans soon to solicit bids to set that price, which will be announced in April or May. ComEd’s current price is 6.02 cents.
ComEd’s charge to deliver power, which makes up the rest of electric bills and is paid by all in the Chicago area regardless of whether they buy their power from ComEd or an outside supplier, increased by $340 million beginning in January, adding $5.50 per month to the average household’s bill.
SMALL HOUSEHOLDS VERSUS LARGER ONES
The new fixed charges are the city’s way of keeping small users’ electric bills from soaring, which would have happened without the new pricing structure. That’s because ComEd allocates the cost of paying for power-plant capacity on a per-household basis rather than by how much each household uses. ComEd’s method has the effect of charging small households more than larger ones for the power they consume.
The city estimates the new pact will save the average Chicago household $34 on their electric bill over the year beginning in June, for a total savings of $24 million. But that’s something of a guess because ComEd’s price hasn’t been set yet.
“By buying electricity in bulk, we have delivered $32 million in electricity bill savings to Chicago’s residents and small businesses since February 2013,” Mayor Rahm Emanuel said in a statement. “This is real money back in the pockets of Chicagoans, and this program will continue to save money over the next 12 months.”
Those savings are not nearly as much as they were a year ago, when Chicagoans first were switched from ComEd to Integrys under the largest such municipal contract ever done in the U.S. But many municipalities around the area, most of which left ComEd for cheaper suppliers in recent years, will find savings harder to come by beginning in the second half of this year. That’s because ComEd had been locked into higher-than-market contracts that have since expired.
Under the new deal, if the average household’s rates turn out to be higher than ComEd’s, Integrys will have to match the price or send its customers back to the utility.
Like the previous deal, the new contract won’t include power from coal-fired sources. In addition, 5 percent of the power will come from Illinois wind farms.