Some suburban electricity deals to be costlier than ComEd

By Steve Daniels  April 03, 2013

underwaterMunicipal politicians who have moved to buy cheap power on behalf of their households have so far experienced nothing but the rewards of playing the energy market. Now officials in 15 towns, including west suburban Oak Park, are about to find out there are risks, too.

Contracts they negotiated more than a year ago with power suppliers to lower residents’ electric bills — that until now offered savings from Commonwealth Edison Co.’s energy price — will exceed the costs ComEd customers pay beginning in June.

ComEd’s energy price, including the costs of transmitting electricity from power plants over high-voltage lines to the utility’s local distribution system, is expected to drop to about 5.55 cents per kilowatt-hour from 8.3 cents per kilowatt-hour currently, according to the Illinois Commerce Commission.

The price being paid by most residents in Oak Park, which has an energy-supply contract with Integrys Energy Services Inc. until December, is 5.79 cents per kilowatt-hour, 4 percent higher than the projected ComEd charge. Making matters worse, Oak Park residents who want to go back to ComEd or find another supplier must pay $50 to exit the Integrys pact.

In 2011, many in the first wave of suburbs to buy power in bulk on behalf of their households and small businesses negotiated deals that forced customers to take on the risk that ComEd’s price might be lower before the contract expired. In 2012, when “municipal aggregation” swept the area and even Chicago got into the game, most deals included consumer protections that allowed customers to exit at any time without paying fees and required suppliers to match the lower utility price or send its customers back to ComEd.

David Kolata, executive director of consumer watchdog Citizens Utility Board, said municipalities need to learn from what’s about to happen.

“It’s important that as the (old municipal) contracts come off that people look carefully at this,” he said. “The environment of easy savings is certainly over.”

The provisions in the Oak Park contract will force village officials to explain why ComEd’s rate will be cheaper than the one they negotiated.

K.C. Poulos, Oak Park’s sustainability manager, emphasized that the village’s two-year contract with Integrys has saved residents and businesses an aggregate $4.2 million so far in utility costs.

As for the remainder of the contract, “we’re investigating our options with Integrys,” she said.

CHICAGO’S ENERGY DEAL

Residents in 14 other municipalities in ComEd’s northern Illinois territory also will have energy prices higher than ComEd’s beginning in June. They include two other western suburbs, Wood Dale and North Aurora, where supply contracts run until July 2014 and October 2013, respectively.

Brad Wilson, Wood Dale’s finance director, said that the village’s contract with Ohio-based FirstEnergy Solutions includes a provision requiring the supplier to match the utility’s price if it’s cheaper or send the customers back to ComEd. Residents also can leave for another supplier without paying a fee.

“We have at least a couple months to get on the same page and see where we go with it,” he said.

Other municipalities have agreed to long-term contracts that don’t look good right now. Two tiny towns in the outer parts of ComEd’s service territory, Riddott and West Brooklyn, will have prices higher than ComEd’s and contracts that run until early 2016.

And Chicago, where residents saw their first electric-bill savings this month under a 5.42-cent-per-kilowatt-hour deal completed in December with Integrys, will see its energy savings shaved to just 2 percent.

Integrys Energy Services President Dan Verbanac said that savings in the future will be far slimmer than they were when suburbs like Oak Park first negotiated their deals. He promised to work with officials in Oak Park and North Aurora, both Integrys customers, and noted that 44 of 46 communities Integrys is serving will continue to see savings under the new ComEd rates.

Addressing the prospect that Oak Park residents will pay more than ComEd customers do over the second half of the year, he said, “From a consumer standpoint, they will have saved a lot of money, plus they’re getting green energy.”

ComEd’s new price is not yet official. But utility representatives have filed their new energy price of 4.6 cents per kilowatt-hour with the ICC and have told the commission they expect forthcoming transmission charges to be about another 0.95 cents per kilowatt-hour. That will make the ComEd “price to compare” cited by competing suppliers when marketing their offerings about 5.55 cents.

A ComEd spokeswoman said the utility would have no comment on its June price until the transmission rate is finalized next month.

The lower prices will mean that the dwindling number of customers still getting their power from the utility rather than a cheaper supplier finally will see significant savings, reflecting energy costs that have fallen dramatically in recent years. ComEd’s power price has remained well above market due to old power-purchase contracts, negotiated when prices were far higher, that are expiring at the end of May.

In northern Illinois, all customers pay ComEd to deliver their electricity but are free to choose from among dozens of suppliers to provide the juice itself. The cost of electricity typically accounts for about two-thirds of an electric bill while delivery charges make up the rest.

One little-understood aspect of ComEd’s electricity charges could help many of these “underwater” municipalities claim their rates still beat the utility’s, even though their deals are more expensive than the official price to beat. Each month ComEd customers pay what’s called a purchased electricity adjustment, or PEA, charge that’s intended to reimburse ComEd for excess power it has purchased on behalf of customers. ComEd has agreed to hold that monthly charge to no more than 0.5 cents per kilowatt-hour. In most months that’s what it is, but there have been a few months where it’s been lower or even has resulted in a customer rebate.

Adding the 0.5 cents to the projected 5.55-cent price to beat yields a total charge of 6.05 cents, which would allow villages like Oak Park to continue to claim savings from ComEd. But there’s no guarantee the PEA charge in any given month will be as high as 0.5 cents.

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