City selects Integrys Energy Services as lone electricity supplier

BY FRAN SPIELMAN City Hall Reporter December 7, 2012 5:54PM

Updated: January 9, 2013 6:12AM

image 1 for City selects Integrys Energy Services as lone electricity supplierMayor Rahm Emanuel’s administration on Friday chose Integrys Energy Services to serve as the lone supplier of electricity to 2.7 million Chicago customers and projected an initial savings of up to 25 percent.

The mayor chose to replace one monopoly, Commonwealth Edison, with another because Integrys offered the “lowest price margin,” the city said, projecting that the average Chicago household would save $25 or “20-to-25 percent” from February through June.

By the time the Integrys contract expires in May, 2015, Chicago households will save $130-to-$150 or eight-to-twelve percent of their current bills.

The agreement will also establish, what the city calls “new standards nationally” by eliminating coal from the fuel mix used by Integrys.

“By buying in bulk, we have secured an agreement that will put money back into the pockets of Chicago families and small businesses while ensuring that our electricity comes from cleaner sources,” Emanuel said in press release issued after the close of business on a Friday, when controversial news is traditionally buried.

“I look forward to working with the City Council to approve and implement the agreement on an expedited time frame so we can start delivering savings.”

Integrys President Dan Verbanac was quoted as saying, “We’re pleased the City has chosen Integrys Energy Services as the exclusive electricity aggregation supplier for Chicago…We look forward to bringing significant savings to our new customers as quickly as possible.”

The Chicago-based Integrys was one of eight companies to respond to the city’s request for qualifications (RFQ).

In Round One, competitors were required to demonstrate they could meet the city’s customer service, clean energy, account management and corporate health requirements. Round Two concluded Friday was based solely on price.

Chicago residents and small business customers will automatically transition to Integrys unless they choose to opt out, either by phone, mail or online. Every eligible customer will receive an opt-out letter from the city and get 14 days to drop out.

Integrys, a publicly traded company with a market valuation of $4.1 billion, owns six regulated utilities that provide natural gas and electric service, including Peoples Gas and North Shore Gas.

Last summer Integrys appeared before the City Council to lobby for Chicago voters to get a chance to decide whether to make their city the nation’s largest municipality to buy electricity in bulk.

Testifying in favor of the referendum was former Chicago Bears great and Super Bowl XX MVP Richard Dent, whose company RLD Resources is working in partnership with Integrys Energy Services, one of Commonwealth Edison’s chief competitors.

“The type of savings you’re looking at is $20 million a month that residential customers can have back at their homes,” Dent said at the time.

“If the city would have went out [to bid] on the first of January, you would have been looking at a savings of $30 million-a-month. … This is very time sensitive. … The more time it takes … your voters are losing money that could be in their pockets. …With today’s economy, $200 or $300 bucks would be a lot” of savings for individual consumers.

Ron Cardwell, vice president of Integrys Energy Services pegged the savings to Chicago residents at $200 million.

“That money goes right back into communities that folks can use to pay for gas and savings. It’s really like an economic stimulus,” Cardwell said on that day.

By a 57 percent vote, Chicago approved a Nov. 6 referendum authorizing Emanuel plan to shop for electricity in bulk in hopes of cutting utility bills. The City Council is expected to approve the legislation setting the stage for the switch next week.

The mayor is moving quickly to jump through a fast-closing window to reduce utility bills.

The Citizens Utility Board has estimated that participating residents can save $9-to-$14-a-month until June 1, 2013, when the window of savings is likely to close. That’s when Commonwealth Edison’s higher-than-market-rate electricity contracts signed with Ameren in 2007 expire, and supply prices are expected to drop.

The plan to chose one supplier for the entire city may not sit well with some members of the City Council.

Last month, aldermen expressed concern about replacing one monopoly with another.

Guidelines proposed by two powerful aldermen—Edward M. Burke (14th) and Pat O’Connor (40th)—had sought to limit any one supplier to 20 percent of the city, guaranteeing Chicago at least five electricity providers.

The model was patterned after the geographic areas established during the early 1980’s when Chicago was wired for cable television.

But a substitute ordinance drafted by the mayor’s office did not include the 20 percent ceiling.

Still, the city’s press release quoted Chicago’s most powerful alderman–Finance Chairman Edward M. Burke (14th)– as supporting the single supplier.

“I am grateful that the City has identified a supplier which will enable Chicago residents and small businesses to save money on their electricity bills. During these tough economic times, it is paramount that city leaders do everything possible to achieve savings for consumers,” Burke was quoted as saying.

The Integrys contract also includes:

– A requirement that the supplier “beat or match” the price charged by Commonwealth Edison—even after ComEd rates go down after its supply contracts expire.

– “Complete elimination of coal,” which now comprises half of the city’s energy portfolio and a “full account” of all sources of fuel used to power the city.

-A 24/7 call center with multi-lingual call takers.

-A clause allowing customers to opt out at any time without penalty.

-A requirement that Chicagoans receive identical rates, regardless of their credit histories.

-A provision that “positions energy efficiency and renewable generation as an alternative resource in the supply portfolio to provide sustained local investments that will result in additional savings,” according to the city.

Although the change is on a fast-track, it’s expected to be a seamless transition. ComEd will still be responsible for delivering electricity, reading meters and responding to power outages. Edison will also continue to send monthly electric bills and receive payments.

Integrys reports having 1.7 million natural gas customers and 500,000 electricity customers. Its other operations are in Wisconsin, Michigan and Minnesota.

For the first three quarters of this year, the company has reported $215.6 million in profit on $3 billion in revenue.

Contributing: David Roeder


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