City: Electric aggregation figures disputed by competitor

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[April 21, 2016]  LINCOLN - On April 18th Don Frontone appeared before the Lincoln City Council during the public participation portion of the Monday night voting session.

Frontone is a consultant for the Stone River Group, an electric aggregation consulting firm. He has appeared before the council on several occasions recently.

On this evening Frontone wanted to talk about the presentation given by Mark Pruitt of ICCAN and Steve Smith of Farnsworth Group on April 4th.

He first asked if the council felt the “numbers” he had presented were different than what Pruitt had presented. He said he wanted to know if his numbers were in question by the council after hearing from Pruitt.

Todd Mourning said he felt the numbers were probably similar, but that Pruitt had given a report in more detail.

Frontone moved on saying that he noted that in Pruitt’s presentation, the discussion of the Purchased Electricity Adjustment (PEA) had ended in mid-year 2015. Frontone said Pruitt had said it was not worth it to do aggregation at that time.

However, Frontone said the scenario should have been carried out, and that the council could have seen that entering into aggregation in 2015 could have been worthwhile.

Frontone said that Pruitt implied that the aggregation of electricity never hit the default rate for Ameren. Thus, there were no savings to be had. He said that the Ameren rate without the PEA had been $0.05824 and with the PEA had been $0.063, so there had been room for savings in the 2015-16 year.

Frontone said that Pruitt had spoken of the high credits on the PEA, but had failed to mention that Pruitt personally was responsible for those credits. Frontone explained that Pruitt was formerly employed by the Illinois Purchasing Authority and had bought electricity for Ameren in 2011. He said that during that time, Pruitt bought too much electricity for Ameren, which in turned forced Ameren to give credits to its consumers.

Frontone said that Pruitt was also the consultant for Chicago and implemented a program that didn’t work because they went to an all green energy program, which was higher priced. He said that Pruitt had said that coal could be outlawed, and going with all green would be beneficial. But, Frontone said, that never worked out. He also noted that the electric industry will never go to all green.

Frontone said that he also questioned if there would ever be a refund from the MISO. Frontone said that the company in question on the MISO auction issues was Dynegy, and that company was looking at pulling out of the MISO. Frontone said, had the company decided not to sell electricity in the Midwest region covered by MISO, it would have had a severe effect on the electric supply. Because of the fear that Dynegy was going to pull out, the price rose based on high demand and the possibility of short supply.

Frontone said he is very doubtful that there will ever be a refund, and he was shocked that Pruitt would take that position. He said, “If we do, I’ll treat you all to a steak dinner.”

Frontone also disputed the statement from Pruitt regarding purchasing power. Pruitt had said that there was no such thing as a volume discount, but he had also said that larger purchasing groups attracted more bidders.

Frontone said that larger groups do have purchasing power and can get better rates, so there is a pricing benefit to being part of a larger consortium. He noted that he had recently signed a very large group and got a rate of $0.0460 because his group had “purchasing power.”

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Frontone said that he felt that some of the points Pruitt made were incomplete. He said, “this should have been done a little further back, and the citizens could have saved $500,000 to $600,000, in Lincoln, in savings.”

Frontone also questions the involvement of Steve Smith of Farnsworth. He said he didn’t know Smith, and at first he thought Smith was the consultant. He asked the council to clarify Smith's position in aggregation.

City Administrator Clay Johnson and Alderwoman Michelle Bauer jointly explained that Smith had been involved in introducing the aggregation process to the county on the whole, working at that time with the Development Partnership of Lincoln and Logan County.

Frontone noted that Smith also works for Farnsworth and wondered when the city had ended its contract with Prairie Engineers. He wondered if Prairie Engineers and Farnsworth were connected. He was told no.

Rick Hoefle asked about the comparison of numbers Frontone had presented. He wanted to understand the difference between the $0.0582 presented early in the talk, and the $0.0460 presented toward the end. Frontone said that the rate of $0.0460 was not a quote for a residential aggregation program; that the quote had been for a larger commercial aggregation, so the two numbers were not related.

Tracy Welch wondered if there was a window of time to get the best price on electricity. Frontone said now is the time to be shopping. He said prices are down, but they are going to go up. He said he would be watching the daily price, and when he sees a move upward, he would get his contract bought as the increase will continue and the moment for the best price will be lost.

Hoefle also asked what length of contract Frontone would recommend. Pruitt had said the contracts should be year-to-year, but Frontone disagreed, saying this would be the time to enter into a two or three-year agreement.

He said in reality, the question needed to be asked of him, not to him. He said the question is, what does the consortium want to do? He said while the price was important, it was also important to have predictability, and locking in a long-term rate would show the consortium and the constituents what they would be spending on a long-term basis.

Frontone concluded saying that he felt like the city needed to be informed and that while they have heard about electric aggregation, he wasn’t sure they were educated on it. He was hopeful that he had shed more light on the topic for the aldermen.

[Nila Smith]

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