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Will electricity bills stay low?

Expert: Market won’t always produce savings

Published: Saturday, Dec. 29, 2012 1:15 a.m. CDT

STERLING – Residents in many towns are seeing their electricity bills drop, thanks to greater competition.

But such savings might not last – at least according to one watchdog group.

“You can’t trust the market to forever give you savings,” said Jim Chilsen, a spokesman for the Citizens Utility Board. “Electricity prices go up and down. You have to rely on other consumer protections, such as efficiency around the home. Efficiency is the only long-term way to save on your electricity bills.”

In 2010, voters in Fulton approved a referendum that gave its town leaders the power to negotiate for lower residential electricity rates. It beat every other community in the state in exercising such authority, including Chicago, which didn’t get that power until last month.

Scores of communities now have approved the referendum, formally known as municipal aggregation.

Many consumers have seen substantial rate cuts. Sterling residents, for instance, get electricity for 4.67 cents per kilowatt hour, compared to ComEd’s rate of 8.32 cents. Chicago negotiated a higher rate than Sterling’s – 5.42 cents per kilowatt hour.

Rock Falls, which runs its own municipal electric utility, can’t benefit from aggregation.

The average Sterling household, using 700 kilowatt hours of electricity a month, will see a savings of $25.55 on its monthly bill. Morrison’s savings will be $24.85, and Chicago’s $20.30.

“Sterling got a good rate,” Chilsen said, “but it won’t last forever. We’re happy consumers are saving in the short term. They have to look in the long term.”

ComEd still handles the distribution system and billing. It is not losing money when towns such as Sterling go with another company. That’s because ComEd is not allowed to make a profit on the sale of electricity. It makes money through distribution.

ComEd and Ameren, which supplies electricity for the southern part of the state, buy power through long-term contracts in a process overseen by the Illinois Power Agency, which was created in 2007.

ComEd’s long-term contracts expire in mid-2013. After that, experts say, the utility will likely offer lower prices, possibly competing with suppliers with municipal contracts.

If ComEd’s rates drop below communities’ new ones, the other suppliers must either match those rates or let towns go back to ComEd.

Mike Mudge, a consultant who has worked with Sauk Valley towns to negotiate rates, said he doesn’t expect ComEd to beat the other suppliers. He said ComEd has certain “embedded” costs that the others don’t. For instance, the utility is required to provide lower rates for space heater users.

“There will always be a gap between the utility rate and what we can buy on the market,” Mudge said.

Dixon voters, who twice have rejected the electricity referendum, will have the issue on the ballot again April 9. Lee County voters turned down the referendum in March, but the County Board is considering whether to send it to voters again.

The issue will be on the Whiteside County ballot for the first time in April.

What they pay

Here's what selected cities and villages are paying for electricity since they passed municipal aggregations referendums. They are all less than ComEd's rate of 8.32 cents a kilowatt hour.

Municipality Price/kilowatt hour Supplier

Amboy 4.67 cents FirstEnergy

Ashton 5.18 cents FirstEnergy

Byron 4.78 cents Direct Energy

Chicago 5.42 cents Integrys

Erie 5.47 cents Nordic Energy

Franklin Grove 4.65 cents Verde Energy

Fulton 6.23 cents FirstEnergy

Milledgeville 5.90 cents FirstEnergy

Morrison 4.77 cents FirstEnergy

Mount Morris 5.94 cents FirstEnergy

Oregon 4.78 cents Direct Energy

Polo 5.83 cents FirstEnergy

Rockford 4.66 cents FirstEnergy

Sterling 4.67 cents FirstEnergy

Walnut 4.84 cents FirstEnergy

Source: Illinois Commerce Commission's Plug In Illinois website

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