Thursday, January 26, 2012
 
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ICCAN pitches for aggregation contract

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[January 26, 2012]  Tuesday evening, members of the Logan County Board and Lincoln City Council joined in a meeting at the Lincoln Park District to hear from two firms vying for the opportunity to serve as consultants in the process of electric aggregation for the county and city. 

County board members in attendance were Andy Anderson, Kevin Bateman, Andy Meister, Bill Martin, Pat O'Neill and Jan Schumacher, all of whom serve on the county's insurance and legislative committee. Also on hand from the county was board president Bob Farmer. 

For the city council, all 10 members were present along with the city clerk, council secretary, city treasurer and city attorney. 

Speakers for the evening were Mark Pruitt of the Illinois Community Choice Aggregation Network and Javier Barrios of Good Energy. Also assisting Barrios was Gary Fogelman. 

The format for the evening allowed each presenter to speak 30 minutes, then field questions for 30 minutes. However in both cases, the presenters said they would prefer to take questions as they arose. 

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Mark Pruitt, Illinois Community Choice Aggregation Network

Pruitt was the first presenter of the evening and began by explaining his organization and its purpose. 

ICCAN is not a single entity, but rather a network of companies formed for the promotion of aggregation in general, not to serve as consultants. Their goal was to establish best practices in aggregation. 

Pruitt said ICCAN believes that communities ultimately want to be able to manage aggregation on their own without consultants.   

He believes the best approach is for consultants to be involved in the areas the governing bodies want them to be involved in, and eventually even step out of the program when city and county governors feel confident to run it themselves. 

He also stressed that the process should be a collaborative effort, with the consultants doing only what local officials want them to. He noted that in the work he has done for other communities, very few ever say, "Just run the whole thing." 

The ICCAN network includes members from the Galvin Center for Electricity Innovation, a research center at the Illinois Institute of Technology; Intelligent Power Partners, the engineering component, headed by John Kelly; and LEAN Energy U.S., a nonprofit headed by Shaun Marshall. Marshall is a former city mayor who has had extensive experience nationwide working to help put together statues and language for legislation for aggregation   

The final partner in the network is the Power Bureau, Pruitt's employer. Pruitt is the former director of the Illinois Power Agency. In that role he worked with power brokers to supply affordable electricity to the delivery companies such as Ameren and Commonwealth Edison. 

Pruitt said ICCAN works with a small staff and has very low overhead, which makes their services more affordable. 

With the combined entities, Pruitt said ICCAN does know how to do procurement, knows the policies, understands the engineering and has the academic recourses to provide the services needed in the process of aggregation. 

Pruitt went through a timeline with the two boards, saying they needed to get started on several things right away. He cautioned that with summer coming, prices would be driven upward. In addition, there will be many communities looking at the same time for better prices, and it may become overwhelming for the alternate retail electric suppliers or ARES. This could affect their pricing structure. 

With the March 20 election just around the corner, Pruitt said in addition to the referendum that needs to be put on the ballot for voters, the boards should start now looking at prospective bidders. 

Pruitt said one big mistake made by a community in northern Illinois is that they didn't do their search early, and when they did seek bids, they asked only for pricing. The result was that they got prices but found in many cases the contracts with the ARES contained language they couldn't live with. This caused extensive delays, and even though they passed their referendum in May of 2011, to date, they still do not have an ARES providing electricity to their community. 

He said this is a prime example of why Lincoln and Logan County should get started early in selecting their ARES. He said every month the boards spend getting ready is a lost opportunity for savings. 

Feb. 1, Ameren will be able to release to the city and county a list of all their customers in the area. This list will be bone basic, providing only the name and address of the account.

Pruitt said the group could also start looking at possible vendors. He said there were only four or five vendors in Illinois that could provide the service to Lincoln and Logan County, and it was not too early to be contacting them. 

He also noted there should be a scoring system of sorts when looking at an ARES, with 80 percent of the score being based on their qualifications as a supplier and their ability to serve this community. 

Pruitt said the group might even be able to fully select their ARES before the referendum is passed.  

Then, if and when the referendum passes, Logan County, Lincoln and the outlying communities will be posed to start sending out their notifications and could easily by May be moving accounts over from Ameren to the ARES. 

As Pruitt explained this, the question came from Alderman Marty Neitzel: "What if Ameren is cheaper?" 

Pruitt said if Ameren could beat the price of the ARES, then the county and city do not have to sign the contract with the ARES. 

As Pruitt talked about the list of customers the city and county would receive from Ameren, he explained the first list will be very basic information. City and county representatives will need to go through the list and identify the accounts as to where they actually are in the county geographically. They then return the list to Ameren. 

After the referendum is passed, Ameren will give local authorities a list with more detail. The revised list should list the accounts, their usage, and whether or not they are involved in any special programs such as the Ameren PIPP, or Percentage of Income Payment Plan, which is administered as a social service program through LIHEAP. 

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Another type of customer who might not be right for a move to an ARES is all-electric homes. Pruitt said special rates are afforded to all-electric customers. 

Others who might not benefit would be those who have high electric usage. Ameren offers a reduced rate to customers who use over 800 kilowatt hours per month. He explained the rate goes down at 801 kwh. For example, if the customer uses a total of 1,000 kwh, the average of the two rates may be lower than the ARES can offer in a flat rate. 

Pruitt said going through all these types of customers would be important because the city and county do not want to enroll customers who will likely not get a better price than they have with Ameren. 

Pruitt was asked by county board member Andy Anderson if Ameren was required to give the city and county all the information about their accounts. Pruitt said they are, once the referendum is passed.   

Pruitt said Ameren also has a team of presenters who will come to public meetings and explain Ameren's role in the delivery of electricity to the customer. He said they would share with customers what the service delivery includes, assuring them they are still responsible for line maintenance and they are the ones to call during power outages. 

Anderson also asked if it would be the role of the consultant to assist in all these analyses of the accounts. 

Pruitt said he felt that it was. He explained it was not in anyone's best interest to switch customers who could not benefit from it. He also noted no one wanted to be getting those irate calls from customers who end up paying more, so it is important to get it right. 

Doing this, he said could be done by attaching information about a customer's current account with Ameren to notices that will be mailed out as they prepare for switching accounts. He said another alternative would be to have a website where customers could log on, enter their current Ameren bill information and have it compared with what the ARES would be charging. 

Pruitt talked about preparing to sign a contract and was asked by city attorney Bill Bates if ICCAN would be involved in this. Bates said he wasn't sure what should be in a proper contract, but Pruitt said he believed that too was part of his job, to go through the contract and assist in understanding the terms and making changes as needed. 

Pruitt said, "We won't dictate to you what you have to do, but we will help you; we'll give you're a draft and help you make it work." He concluded with, "You drive the bus here, you're going to take the lumps if it goes wrong, so you should be able to set the terms here." 

As Pruitt's hour drew close to an end, he was asked by Alderwoman Melody Anderson what ICCAN's fees are and how are they paid. 

Pruitt said there are two ways to pay ICCAN. First, he emphasized that ICCAN will be working for the city and county, not the ARES, and the best method is to be paid by the local entities. He said this can be done by ICCAN invoicing Lincoln and Logan County, and the city and county paying out of their general funds.   

Another method would be for ICCAN to hold their billing until all the switching to the ARES was completed. Then the governing bodies could build their cost of the consultant into the consumer electric rate, collect the funds and pay ICCAN.   

ICCAN works with a "not to exceed" clause. In other words, the rate they charge will more than likely be in the area of 15 to 25 cents per megawatt hour of electricity purchased, with a guarantee the price will not exceed the larger of the two figures. 

Bates asked what would happen if no contract was signed with an ARES.

Pruitt said that is ICCAN's risk in the deal. If they do everything they can to get a good contract and cannot do it, or if the referendum fails, then ICCAN's work would have been provided at no charge. 

Snyder asked if there were any ARES that ICCAN had other relationships with. Pruitt said not in the way Snyder was meaning. ICCAN has worked with several ARES, so they have business relationships with them, but they don't take money from any of them. He said he would provide affidavits to that effect when the city and county hire his firm. 

Finally Pruitt was asked by county board member Andy Anderson simply, "Why should we hire you?" 

Pruitt said: "To make it simple, I believe in the end you'll find we are at a lower cost.  Secondly, I think you'll get more innovative advice from us. We come to this not from 'we want to be consultants, we want to make money consulting'; we come to this from a policy standpoint. Our partners have said 'municipal aggregation has to work well for its full potential to be realized.'" 

He continued by saying ICCAN wants to ensure that aggregation is successful by establishing best practices that can be used by everyone. He finished by saying his firm will bring their experience and perspective to the process so that it will work out well for Lincoln and Logan County.  

[By NILA SMITH]

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