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 History of the Logan County Consortium
In 2011/12, the city of Lincoln became involved in an electric
aggregation consortium with Atlanta, Emden, Logan County, Mount
Pulaski, New Holland, and a collection of other communities not
located in Logan County.
At that time, there were ten aldermen on the city council and five
wards in the city. Since that time, there have been a number of
changes in city government, including the reduction of city wards
from five to four. The reduction of wards also reduced the number of
aldermen by two. Additionally, changes made in five of the remaining
eight seats on the council. As a result, five of the eight aldermen
sitting on the council today were not on the council in 2012:
Michelle Bauer, Rick Hoefle, Todd Mourning, Steve Parrott and Tracy
Welch. Aldermen on the council in 2012 include Jeff Hoinacki, Kathy
Horn, and Jonie Tibbs. Also in 2012, now Lincoln's mayor, Marty
Neitzel was a sitting alderman.
The evening began with Steve Smith presenting a resume from himself
and Pruitt, explaining their extensive experience with public
utilities in general and electricity specifically. Smith recounted
working on a number of projects in Logan County including assisting
the Development Partnership in 2011 to introduce electric
aggregation to Logan County.
 He also explained Pruitt’s extensive experience buying and selling
electricity as a commodity. Pruitt has worked extensively with the
University of Illinois, as the Illinois Power Agency, which was a
state agency; then went to work with ICCAN.
Pruitt then took over the discussion walking through the history,
and the aggregation process, to help those who are now on the
council understand what happened in 2012 and then in 2014 when the
aggregation process was up for renewal.
Using a 21-page handout, Pruitt offered visual assistance to help
explain the aggregation process and factors impacting the cost of
electricity.
On page four of the handout, Pruitt showed a copy of a typical
Ameren Illinois utility bill for a Lincoln resident. Pruitt walked
through the different areas of the bill and pointed out that the
only portion of the bill that is impacted by electric aggregation is
the Electric Supply portion (shown with a blue outline). In the box,
the first line of the bill is the actual electric rate and is the
only portion of the bill that can be determined through aggregation.
However, it was also noted that the second line the Purchased
Electric Adjustment (PEA) also has a bearing on the final price of
the electricity purchased by the consumer.
 Pruitt explained that municipalities may choose aggregation for
their constituents, and they do so with the goal of saving those
constituents dollars on their total bill by achieving a lower
electric rate than what consumers can get through Ameren Illinois.
He also explained that though the municipality may choose an
electric supplier with a lower rate, consumers are not forced to
purchase from that chosen supplier. Consumer options include staying
with Ameren by “opting out” of the aggregation process, or they may
choose to shop for their own rate.
It should also be noted that consumers need to analyze their bill
and determine if the rate ends up truly being cheaper for their
particular household. For example, Ameren has price incentives for
all-electric households that can make Ameren the best value, even
when the city chooses an electric supplier whose base rate is less
than Ameren’s.
The 2012 aggregation process
Pruitt moved on to discuss the process in 2012. At that time, the
Development Partnership and Farnsworth brought the idea of
aggregation to the County and all the municipalities in Logan
County. They discussed the value of aggregation and the value of
forming a consortium. Pruitt noted on more than one occasion during
the evening that forming the consortium did not get the group a
volume discount on electricity.
So, why form a consortium? Electric suppliers are looking to signup
a large volume of customers at one time. When it came time to take
bids for the electric agreements, the number of suppliers interested
in bidding was large because they were going to be getting a big
share of the local business. Had any one of the cities involved gone
out for bid on its own, the number of companies interested in
bidding would have been far fewer.
 In 2012, when the consortium represented by Pruitt went out for bids
five companies submitted bids. Of the five Integrys Energy Services
had the best price of $0.03965 per kilowatt hour. The consortium
chose to add a stipulation that 25 percent of the electricity
provided come from renewable energy sources. That increased the rate
to $0.041.
Farnsworth Group and ICCAN collected $1,875 for their services. That
amount was added to the kilowatt rate and came to another $0.000275.
Therefore, Lincoln residents had the opportunity to purchase
electricity at just over $0.04 per kilowatt hour, while the Ameren
rate was more than $0.05 per kilowatt hour. This came to total
savings citywide for residents of about $60,000.
Pruitt said this started out as a very good deal for Lincoln
residents, but it didn’t stay that way. The city signed on to
aggregation to take effect in September of 2012. Through June of
2013, the savings to consumers was right on track, but then
something happened that impacted the amount that would have been
charged by Ameren. Understanding the PEA
Pruitt explained the concept of the “Purchased Electricity
Adjustment” factor for Ameren.
PEA is a balancing factor that allows Ameren to add costs or take
away cost to the default rate customers based on the actual costs
Ameren incurs for delivery of electricity. Pruitt noted, “The PEA is
a reality in life, and it can be fairly significant.” Pruitt went
on to say Ameren publishes its rates so that consumers can shop, but
he said that rate is adjusted monthly based on the estimated amount
of electricity it will deliver. He said that if Ameren takes in too
much money in this process, then the PEA becomes a credit back to
its customers. So, in determining the true cost of the electricity,
the default rate has to be combined with the PEA to get the true
cost of electricity.
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Pruitt showed a slide that explained how this had affected the cost
of Ameren delivered electricity. He noted that the bars at the
bottom of the chart represented the credits Ameren had to give
customers based on the PEA. He noted that these credits peaked in
September of 2013. By comparison, the net cost of Ameren electricity
dropped to such a point that those who were on electric aggregation
were, in essence, losing savings on their monthly bill by being with
Integrys.
In another slide, Pruitt showed that the PEA credits stayed high
through the summer of 2015, then began to drop. By the spring of
2015, the credits were quite low. This could have indicated that it
would have been good to enter into aggregation in 2015, but Pruitt
explained there was an additional factor playing into the situation,
and that factor led him to advise the city not to enter into a new
aggregation contract.
A disastrous MISO auction in 2015
Pruitt said that there is a capacity auction by Midwest Independent
System Operator (MISO) that manages the Midwest market and is tasked
to assure there is enough electricity available for the market.
Pruitt noted in a slide that this portion of Illinois is in Zone 4.
At the auction that would impact the June 2015 to May 2016 year, the
Zone 4 auction amount went to a staggering $150 per megawatt day,
while in all the other areas of the Midwest the auction rate was
less than $5 a day.
Pruitt went on to explain that this extremely high auction figure
caught the attention of many, and multiple complaints were filed
with the Federal Energy Regulatory Commission (FERC). Complaints
ranged from accusations of market manipulation to complaints that
the auction rules did not have sufficient safeguards to prevent
certain bidders from having power over the market. The accusations
pointed fingers at an electric retailer called Dynergy.
As a result, Pruitt said that the FERC launched an investigation of
the auction, and it is anticipated that there will be refunds to
electric consumers. He noted a quote for Illinois Attorney General
Lisa Madigan, and Tyson Slocum, director of Public Citizen’s Energy
Program. Slocum said, “If FERC follows the logic of its New Year’s
Eve ruling, and regardless of whether the commission finds Dynergy
manipulated the market, then Illinois consumers will be in line for
tens of millions of dollars in refunds.” Madigan stated, “It is
great news that FERC has acknowledged downstate electric customers
deserve relief from an inflated and absurd pricing process. I am
pleased with FERC’s decision to fix the auction rules, but FERC
still needs to order refunds to consumers of the outrageously high
prices.”
 Pruitt said he believes these refunds will come, and for that
reason, he recommended that the Logan County Consortium stay with
Ameren and wait for the final result of the FERC decisions. He said
that refunds could be about $28 for the average customer.
Looking at how to move forward
Now, with the annual MISO auction on the horizon, and Ameren set to
release its default rate, Pruitt said this could be a good time to
get back into an aggregation program. His intention is to monitor
the outcome of these factors, look at the energy market and make a
recommendation to the Consortium.
He said moving forward, the Consortium will have the option to
maintain an “opt-out” program wherein residents will automatically
be enrolled in the aggregation program and will have to “opt-out” to
stay with Ameren. Or the Consortium can go with the Opt-in” program
where it will announce the aggregation program, name the company it
recommends and Consortium residents will need to say they choose to
be part of the aggregation program.
Finally, Pruitt said that participating in an aggregation program is
always going to carry risks because the market can and will change.
He said that entering into a three-year agreement, in his opinion is
not the best option right now. He would prefer to see the Consortium
go with a year-to-year program so that it does not tie consumers to
an aggregated rate that ends up costing them savings.
Smith returned to the speakers table to close the presentation,
saying that he, representing Farnsworth; and Pruitt representing
ICCAN, have appreciated the opportunity to work for the Consortium
and hope to continue the relationship.
The floor was then opened for questions from the aldermen. Todd
Mourning asked if the price of oil had an impact on the cost of
electricity. Smith said the short answer was “no.” Pruitt expanded,
saying that the cost of electricity is more often driven by the
price of natural gas.
There were no further questions from the council.
[Nila Smith]
Complete copy of presentation by Mark Pruitt
pdf
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