Monday, January 23, 2012
 
sponsored by

Understanding electric aggregation and what it means for local residents

Send a link to a friend

[January 23, 2012]  Over the last few months "electric aggregation" have become the buzz words for city and county officials as they have attempted to work their way through understanding the process of aggregation and how it will benefit their constituents.   

The city of Lincoln was approached by BlueStar Energy, a firm that was capable of selling electricity but also capable of serving as a consultant to those looking to buy electricity. The firm's proposal to the city was for consultant services only, with a written promise they would not bid on the actual electricity, thus eliminating the perception of a conflict of interest. 

At that time BlueStar was making the rounds throughout Logan County, visiting all the incorporated districts and urging them to also agree to allow the firm to represent them. In addition they were talking to county board officials, again offering their services as consultants. 

In December, Lincoln aldermen voted to hire BlueStar as their consultant. However, within just a few short weeks, BlueStar was sold to another entity; American Electric Power, a company out of Columbus, Ohio, which happens to be among the nation's largest independent providers of electricity. 

Misc

At that time, the city was offered the opportunity to back out of their contract with BlueStar so they would be able to accept bids from the new owner; AEP.  Therefore the city is once again in the market for a consultant who will guide them through the aggregation process. 

According to Jan Schumacher, a Logan County Board member and chair of the insurance and legislative committee, the county had heard from BlueStar, but when the company sold to AEP, the board had made no decision about whether or not to hire the firm as their consultant. 

With the county under no obligation yet, and the city back on the hunt, the two entities are teaming together this week to hear from two aggregation consultants. 

The Illinois Community Choice Aggregation Network -- a nonprofit organization made up of the Galvin Center at the Illinois Institute of Technology, LEAN Energy U.S. and the Perfect Power Institute -- will be one option the group will hear from.   

The second company is Good Energy. On their website, the Good Energy mission statement contains a capabilities statement that includes the following: "We began in Pennsylvania and have subsequently expanded into New York, Ohio and Texas where deregulation is giving consumers new power to choose. Good Energy offers both supply side and demand side management services. We have no financial interest in any fixed energy assets, (power plants), and therefore can give unbiased energy procurement advice." 

The city council will host the joint meeting with the county's insurance and legislative committee at the Lincoln Park District Ballroom Tuesday evening at 6. This is an open meeting with the public invited to attend. 

What is electric aggregation and what does it mean for residential and small business consumers of electricity? 

In 1997, Illinois legislators passed the Illinois Electric Service Customer Choice and Rate Relief Law of 1997. 

The law was written to break what was essentially a utility monopoly with two key players, Ameren Illinois and Commonweath Edison. 

At that time, customers had no choices of who provided their electricity to them and thus had no control over the cost of the services. 

One of the things the law brought about was an immediate change to the billing process by requiring the bill to show the cost of the actual electricity provided in one section and the cost of the transmission of electricity in another. 

On an Ameren bill, this shows up as "Delivery Service," which must be provided by Ameren, and "Electric Supply," which can be purchased by the consumer from Ameren or another source.  

In addition, the companies were no longer allowed to own the electricity generators (power plants), and the two were required to sell their electricity generation assets to other affiliated and unaffiliated energy companies. 

Also included in the new law was a cap on utility costs to be in effect for 10 years, or through 2007. 

Placing the cap on the rates the two major companies could charge made it very difficult for independent providers to compete for the delivery of electricity; therefore, for the first 10 years of the new law, very little was heard about deregulation. 

In 2006, the General Assembly passed the Retail Electric Competition Act. The act established the Office of Retail Market Development, removed certain barriers to competition and encouraged residential and small business customers to switch to an alternative electric provider by promoting temporary, fixed-discount programs. 

When the cap established in the act of 1997 ended in 2007, electric consumers were hit with enormous rate hikes from both companies, resulting in many paying as much as 50 percent more for the same services. 

In 2008 a pilot program for residential and small business consumers was established with a very small number of customers in the ComEd territories. Those consumers chose alternate retail electric suppliers, or ARES, as their electric providers. 

By November 2009, only 234 residential customers had switched to an ARES. However, the number of small businesses and larger industries involved was growing, with a total of 71,000 customers participating. 

Along the way the Interstate Commerce Commission established a criterion for registering and certifying ARES for the state. At the end of 2009 there were only eight ARES registered and certified in Illinois. Today, according to the ICC website, there are 62 ARES registered in the state.

Of those, eight are certified to provide electricity in the Ameren Illinois territories: BlueStar Energy Solutions, now owned by AEP; Champion Energy LLC; Constellation Energy; Direct Energy Services LLC; FirstEnergy Solutions; Integrys Energy Services Inc.; Liberty Power Holdings LLC; and Nordic Energy Services. 

Those who are certified to offer electricity in the ComEd territories include: Ambit Northeast; BlueStar Energy Solutions; Champion Energy LLC; Commerce Energy Inc.; Consolidated Edison Solutions Inc.; Constellation Energy; Direct Energy Services LLC; Energy Plus; FirstEnergy Solutions Corp.; IGS Energy; Illinois Gas & Electric; Independence Energy; Integrys Energy Services Inc.; Liberty Power Holdings LLC; MC Squared Energy Services; MidAmerican Energy; NextEra Energy Services Illinois LLC; Nicor Electric; Nordic Energy Services; Reliant; Spark Energy L.P.; Verde Energy USA;  and Viridian Energy PA LLC 

[to top of second column]

Throughout this process, the option of choosing an independent electric producer was left to the individual consumers, and today that is still an available option for anyone who chooses it. 

As such, there could be, for example, three homes in a block, with one buying their electricity from Ameren, one from First Energy and a third from Nordic or any of the other eight providers certified in the Ameren territories.   

While the consumers who choose to go with one of the ARES may be enjoying some savings over using Ameren, they may not be getting the full benefit of a competitive industry. With independent providers vying for one household at a time, they have no real idea of the number of customers they may be able to draw; therefore, they are not able to discount their rates based on volume. 

Aggregation of electrical load by municipalities and counties 

In 2010 the state passed the "Illinois Power Agency Act. Section 1-92 -- Aggregation of electrical load by municipalities and counties" (20 ILCS 3855/1-92). 

This act empowers municipalities and or counties to act on behalf of their residents and small businesses in negotiating an electric rate for the community or area, providing they are given authority by referendum. 

With the county and city involved, this offers the potential of a large number of customers in one geographical area switching from Ameren to an ARES. This basically allows the ARES to consider volume discounts based on the number of customers in the region. 

Under the act, Lincoln and Logan County will each have to place a referendum question on the ballot in the March election. 

The law calls for the question to be stated as: "Shall the (city or county) have the authority to arrange for the supply of electricity for its residential and small commercial retail customers who have not opted out of such program?" The election authority must record the votes as "Yes" or "No." 

In this question, the words "opt out" are crucial.  If the vote comes in with the majority saying "yes," then the city or county has the authority to choose a supplier, and their constituents will automatically be switched to that supplier, unless they opt out, or choose not to participate. 

However, if the vote comes back with the majority saying "no," the city or county can still select a supplier for their constituents if they so choose.   

In doing so they would be implementing an "opt-in" program where they could in essence say to local small businesses and residents: "We've chosen this company, have negotiated a price on your behalf, and you may take advantage of this if you wish, but it isn't automatic, you have to opt in.

Why the city and county need a consultant and what that firm may do for them  

The process of electric aggregation is a complicated, multi-step program that is going to involve a great deal of expertise and time. 

Tuesday night the two firms coming before the joint committee for the city and county are expected to outline specifically what they will do to assist in this process. 

Generally speaking, the consultant will have a variety of roles throughout the process, beginning first with the education of the community on aggregation and, hopefully, the passing of the "opt-out" referendum. 

Internet

If and when the referendum passes, the city and county will each need to pass an ordinance allowing for the aggregation process. As needed, the consultants may be expected to assist in the creation of that document. 

Before taking bids from ARES, the two governing bodies will need to create their bid package, or an outline of what they want their provider to offer. For example, one of the things included in the specifications could be specific discounts for senior citizens. 

Once the bid specifications are completed, the consultant may also play a role in sending those packets out to ARES and collecting them back. 

In addition, once bids are returned, the consultants may also play a role in helping the city and county choose which bidder has the most to offer the Lincoln and Logan County community. 

At last week's city council meeting, Mayor Keith Snyder said ICCAN and Good Energy would each be given a list of questions based on the conversations the city had when talking to BlueStar. He said the two firms were to respond to those questions in writing ahead of the meeting, and when they did, he would distribute their answers to the council and to the county's insurance and legislative committee members. 

Tuesday night, each company will be given 30 minutes to present their proposal and, as needed, up to 30 minutes to answer questions. 

The representatives will be kept outside the general meeting area, not allowed to hear each other's presentations or the questions asked. Snyder said this would even the playing field for the two companies, giving neither one of them the advantage of knowing how the other may have answered. 

Wednesday, there will be a meeting of select representatives from the city and county who will discuss the events of Tuesday night, and with all good luck come to a unified decision as to which of the two firms they will recommend to their respective governing bodies. 
 
___

Online sources for this article include the following:

Illinois General Assembly -- Public Utilities Act 220 ILCS 5/

Onecle -- Illinois Compiled Statutes 20 ILCS 3855 Illinois Power Agency Act. Section 1-92 

Community choice aggregation brochure

Good Energy

The history of electricity deregulation in Illinois

Plug In Illinois

[By NILA SMITH]

< Top Stories index

Back to top


 

News | Sports | Business | Rural Review | Teaching and Learning | Home and Family | Tourism | Obituaries

Community | Perspectives | Law and Courts | Leisure Time | Spiritual Life | Health and Fitness | Teen Scene
Calendar | Letters to the Editor