Why alternatives to ComEd are no longer a great deal

By Steve Daniels  July 15, 2013

Two years after suburbs began generating huge savings on their residents’ electric bills by contracting with alternative suppliers to Commonwealth Edison Co., many municipalities whose deals are expiring are struggling to attract decent offers. A few towns are sending their constituents back to ComEd, and others are signing deals at prices higher than ComEd’s rate.

Meanwhile, the city of Chicago, which late last year negotiated the nation’s largest such contract with Chicago-based Integrys Energy Services, already has seen its electricity price increase by 3 percent to 5.59 cents per kilowatt-hour from 5.42 cents. Integrys’ price change, which passed through transmission costs outside of the supplier’s control and is permitted under its contract, puts Chicago slightly above the 5.51 cents per kilowatt-hour ComEd customers are paying.

The recent developments call into question the promise of municipal power purchasing, which roiled the northern Illinois power market over the past few years as suppliers easily bested ComEd prices. The vast majority of towns in ComEd’s service territory struck such deals with outside suppliers.

Then ComEd’s price fell dramatically in June after a high-priced, long-term supply contract expired. Now, most alternative suppliers are unable or unwilling to make better offers.

“The good times are over,” says Craig Schuttenberg, a Chicago energy consultant who recently advised Oak Park to extend a price above ComEd’s for five months in return for the supplier, Integrys, agreeing to help finance landfill gas controls that reduce carbon emissions. “I can’t justify (a price) over the ComEd price unless you’re getting something else for the community.”

image 1 for Why alternatives to ComEd are no longer a great deal

But many suburbs are doing just that. West suburban Franklin Park last spring re-upped with Integrys at 5.85 cents per kilowatt-hour, 6 percent above ComEd’s rate. That contract runs through March. South suburban Dolton recently extended its deal with Integrys, at a price of 5.75 cents, through January. Integrys also agreed to extend deals with a consortium of seven northwest suburbs, including Arlington Heights and Buffalo Grove, at 5.58 cents.

In a statement, Integrys says it “continues to deliver benefits to communities and customers interested in the savings, cleaner-energy options and stable, long-term pricing that electric aggregation brings to Illinois consumers.”

In letters to constituents, many of the communities and their suppliers said their deals produced savings over an “effective” ComEd price of a little more than 6 cents. But those interested had to read the fine print to understand the figure assumed ComEd would charge its customers a maximum of 0.5 cents each month to cover potential costs associated with buying power.

The “purchased electricity adjustment” only affects ComEd customers. It can be either a charge or a credit, and most of the time this year it has been the latter: In June, ComEd customers received a 0.5-cent credit, making ComEd’s effective energy charge just 5 cents (view the PDF). That made the utility’s price last month well below that of the city of Chicago and many suburbs.

“Some of the communications we’ve seen to consumers are not as transparent as we’d like,” says David Kolata, executive director of consumer advocacy group Citizens Utility Board.

Many communities and their suppliers said their deals produced savings over ComEd’s ‘effective’ price.

Michael Negron, chief of policy for Chicago Mayor Rahm Emanuel, says that if it looks as though Chicago’s price will consistently be above ComEd’s, including the PEA charge, then the city will send its nearly 1 million customers back to ComEd, as the Integrys contract allows. But Mr. Negron thinks there likely will be savings over the rest of the deal, which expires in May.

ComEd has told suppliers that it’s “likely” the PEA will be a charge for the remainder of 2013, although not necessarily at the 0.5-cent level. July’s charge is 0.3 cents. For next year, there are no projections.

The bottom line in today’s municipal-aggregation market, Mr. Kolata says, is “you’re getting what the ComEd price is in general.” It will be up to suppliers to convince consumers and local politicians that there’s extra value in their deals, he says.

A few aren’t seeing it anymore. Northwest suburban Fox River Grove, one of the first suburbs to strike a power savings deal on behalf of its residents, in 2011, is sending its constituents back to ComEd after the deal with Toronto-based Direct Energy expires in September (view the PDF). West suburban North Aurora terminated its contract with Integrys last month to return its residents to ComEd after Integrys told the village it was raising its price to 5.95 cents from 5.75 cents. North Aurora then struck a new one-year deal with supplier Verde Energy USA at 5.32 cents, which will start in September. In the meantime, North Aurora residents will get their power from ComEd.

Southwest suburban New Lenox recently decided to send its residents back to ComEd when its deal with Direct Energy expires in August. But Mayor Tim Baldermann said late last week that he might recommend that the village board approve an eleventh-hour offer of 5.15 cents from Integrys.

“We absolutely would not do this unless we were pretty well- assured the savings would be there for our people,” Mr. Baldermann says.

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