 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.
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
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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.
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] |
