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City Manager Shumard wants to see more electricity options

City will get second set of bids on Monday

Published: Thursday, May 29, 2014 1:15 a.m. CDT • Updated: Thursday, May 29, 2014 9:08 a.m. CDT

STERLING – The city has received the first set of bids from prospective electricity suppliers, and ComEd would appear to have the inside track – even factoring in its latest rate increase.

City Manager Scott Shumard received five bids gathered by independent agency Rock River Energy Services.

ComEd’s increase of 38 percent for its residential energy rate kicks in June 1. The utility’s new rate of 7.596 per kilowatt-hour is up from 5.52 cents. With that rate hike, the estimated increase in the average household bill is 20 percent, or $82 a month. The increase is reflected in ComEd’s comparisons with the five bids received by Shumard.

“All of the bids still came in higher than ComEd’s newest rate,” Shumard said.

Mike Mudge, owner of Rock River Energy Services, warned the council May 19 that the aggregation savings would not be as pronounced this time around. The city saved $1.3 million during the life of its first contract.

“You won’t see the savings in the next round that you saw in the first round,” Mudge said.

Currently, ComEd’s rate is 5.52 cents per kilowatt-hour. It was as high as 8.32 cents earlier in the contract. Sterling’s current contract with FirstEnergy is for 4.67 cents.

The spread between ComEd and other bidders had been larger, because ComEd had been locked into long-term contracts with power producers that had been signed when prices were much higher than current wholesale prices. Those contracts are now expiring.

The lowest of the five bids, from MidAmerican Energy Co. in Des Moines, Iowa, came in at 8.15 cents per kilowatt-hour.

Before making a decision, Shumard wants to see more options.

“We’re going to get another list of bids,” Shumard said. “Mike will be back to present them at the [Monday] council meeting.”

For municipalities, Mudge said, he sends bid requests to 18 to 20 suppliers.

“We may get back only four to six bidders, but we cast a pretty large net out there,” he said.

Shumard said the purchased electricity adjustment portion of the bills could move the rate up or down about a half-cent from the commercial price. The adjustment fixes any discrepancies between what the suppliers and customers pay for electricity during that period. Utilities are supposed to charge market value with no markup.

The city must also carefully consider all years in any multiyear contracts to figure out the best deal over the life of the pact. MidAmerican’s bids are 8.08 cents per kilowatt-hour in the second year, and 7.79 cents in the third year.

“Taking one of these bids might still be the way to go,” Shumard said. “Do we take a little pain for a better overall deal?”

This is only the second time the city has sought bids since municipal electricity aggregation was allowed. Sterling’s first aggregation contract, with FirstEnergy Solutions, will expire in August. That deal was for 2 years, after bids were sought on 2- and 3-year contracts.

Given the current bidding climate, the longer-term deal is probably the way to go, Mudge said.

“We’re all playing on the same time frame now, so I think it’s prudent to lock into the 3 years,” Mudge said. “The longer we go, the better the price is.”

Complicating matters is a big unknown.

“The big question is, Do we think ComEd is going to increase their rates again?” Shumard said. “The answer to that depends on the Illinois Commerce Commission.”

There is a June 30 deadline to get opt-out letters to customers, and the accounts must be given to the new supplier by Aug. 20.

Mudge reminds customers that, if ComEd isn’t the new supplier, they can go back to the utility without a penalty, even if the opt-out letter wasn’t signed.

“You can opt out any time, and the suppliers have no termination fees,” Mudge said. “All you have to do is call the supplier and say you want to go back to ComEd.”

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