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Expert: Higher electricity prices for a while

Rock Falls residents paying more on old contract

ROCK FALLS – The Rock Falls Community Development Corp. advertises lower electricity prices as one of the reasons to do business in Rock Falls.

Residents enjoy those prices “under most circumstances,” the group says.

Well, the circumstances have changed. As a result, Rock Falls residents are paying sharply more for their electricity than consumers across the river in Sterling.

And that situation probably won’t change for the next couple of years, an expert says.

Earlier this year, Sauk Valley Media, which compared power bills between the two towns, found that a Rock Falls resident spent nearly 30 percent more than a Sterling resident for about 900 kilowatts of electricity in a month.

In September, Sterling residents started enjoying dramatically reduced rates. That was the result of a process known as municipal aggregation, in which a town’s voters can approve a referendum to give their municipal leaders the authority to negotiate lower rates with electricity providers.

Many other towns have taken advantage of the process. Lee and Whiteside counties are on the verge of switching to new providers.

ComEd, which makes no money from the sale of power, still handles billing and distribution for areas outside of municipal utilities.

Phillip “Doc” Mueller, a spokesman for the Illinois Municipal Electric Agency, said city utilities generally have lower rates because they enter long-term contracts. But while municipal utilities were locked into such contracts, a glut of electricity generation in the Midwest brought down prices a few years ago, he said.

The pricing difference between municipal and private utilities should dwindle in a couple of years, Mueller said.

“In 2015 and 2016, many of the coal plants will have to meet new federal regulations or go off line,” he said. “There will be a large amount of generation that goes off line. That will put inevitable, upward pressure on prices.

The municipal agency to which Rock Falls belongs has generating assets with a 30-year lifespan.

“We should see, over time, something of a price advantage,” Mueller said. “The philosophy is different [with municipal utilities] in that we hedge our risk going forward, so our customers don’t see huge spikes in power costs.”

Mike Mudge of Oregon-based Rock River Energy, which has negotiated rates for most area towns, said he believes that with aggregation, municipal utilities won’t have their traditional advantage in pricing.

“To make a long story short, competition has worked and dropped prices,” he said. “The co-ops and municipals are stuck under long-term contracts.”

He remembers that when he worked for ComEd in the 1990s, a major company in Rock Falls decided to leave ComEd and go with the city utility – a choice large industrial customers had.

“I was an account manager with ComEd,” he said. “I didn’t like losing a big customer. In today’s world, the company wouldn’t do that.”

Mueller contended city electric utilities are better for customers long-term.

“Municipal systems traditionally have the best value,” he said. “We go out and negotiate long-term contracts. We purchase resources. You pay a bit of a premium in early years. Then you will pay less money over time. We found ourselves cheaper than everyone else for 20 years, but now we’re comparable.”

Another advantage of city utilities, Mueller said, is dependability.

“Municipal power is a hell of a lot more reliable,” he said. “You don’t have long outages. You have crews who are dedicated to that municipality.”

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