Bad Deal for Chicago Residents
Oct 9, 2013

Uh oh…Are you currently enrolled in Chicago’s Energy Aggregation program?

Picture this. You’re opening your June 2014 electricity bill and you’re surprised to find that your electric rate has suddenly and unexpectedly jumped by nearly a full 1¢ per kWh. You do some math and suddenly realize that the annual savings you thought you were going to get from aggregation are not nearly as much as you had hoped for, or are gone altogether.

Now, remember for a moment that in November 2012, the City of Chicago’s agreement through Integrys Energy promised the City Aggregation program would offer participants a fixed-rate of 5.42¢ for 1 year. But, there’s a clause in the supplier fixed agreement that allows suppliers to pass-through any Network Integration Transmission Service (NITS) fee increases onto its customers. And that’s exactly what happened – and that’s why the rate’s now at 5.589¢/kWh instead of the 5.42¢/kWh that was initially promised. So what this means is that a “fixed rate” doesn’t always mean a “fixed rate.”  You have to read the small print…

And there’s more…

You should also be aware that looming just over the horizon is something called capacity increase that’s going to raise your electric rate again.

Capacity is one of five components that determine the pricing for electricity. The other four components are energy, line loss, transmission, ancillary and Renewables Portfolio Standard (RPS). Capacity requirements are determined by PJM – the regional electricity transmission organization (RTO) that coordinates the movement of electricity and administers wholesale electricity markets. PJM has implemented a mechanism for encouraging the provision of electricity generating capacity in its territory. It’s called the Reliability Pricing Model (RPM) which entails an annual process to determine capacity requirements for a twelve month period, three years in advance.

So, as you can see, a capacity charge increase is made known well in advance. And this is where it gets tricky. If a supplier acknowledges this future rate increase, they will likely make this additional charge part of their long-term fixed rate, with a price that reflects that cost right from the onset. Then, that supplier who is trying to win a contract with a city like Chicago, finds themselves competing against suppliers who are bidding short-term fixed rates noticeably lower than the bid they offer which incorporates the future rate increase.

The decision to offer a short-term fixed rate obviously gives a supplier the edge to negotiate and in the case of Chicago, land the nation’s largest municipal energy aggregation deal, estimated at $300 million dollars.

So what are your options now?

Luckily, you have the choice at any time to opt-out of the City’s aggregation program without any cost or penalty. After doing so, you’re left with three other options:

Option 1: Return to ComEd.

You might think about opting out and going back to the utility to save money. Currently, ComEd’s rate is set at 6.441¢/kWh for September 2014. This rate is also expected to significantly increase because of the capacity charge increase. So, if you’re thinking that saving money is a reason to go back to ComEd, you might want to think twice.

Once returning to ComEd, residential customers only have 2 months to decide on a different supplier. At the end of those 2 months, if you haven’t signed a new contract with an alternative supplier, you’ll be stuck with ComEd for a minimum of 12 months with no option to switch.

Option 2: Find another supplier.

Deregulation works wonderfully for large businesses, factories and other large-scale electricity users because they have the buying power to attract the attention of many electricity suppliers who will compete with each other to offer the best prices and contract terms. However, individual residents and small businesses that can’t possibly use as much electricity as a factory cannot encourage much competition by themselves.

So, the odds of finding a competitive rate on your own against the utility or the City aggregation program are slim to none.

Chicago's Electricity Rate

Option 3: Non-government private aggregation.

The best option is to contact an energy broker like Alternative Utility Services (AUS) and let them help you find a non-government private aggregation program. Customer accounts with similar load profiles are aggregated together, granting them the buying power needed to be able to negotiate for the best prices and terms with competing suppliers, just like those large-scale factories and businesses. Although there are typically fewer participants in a private aggregation, electric suppliers are attracted to them because they know they’ll only have to serve the types of accounts that they truly want to serve.

For example, a manager of a 16 unit property in Chicago, whose residents had electric contracts soon to end, wanted to investigate the electric options currently available. Unaware of the range of choices, she assumed the City of Chicago price was the best option. Just to be sure, she contacted AUS so she could confirm her recommendation.

After gathering a small sampling of invoices from the property to submit to providers for pricing, AUS was able to secure pricing for up to a 36 month term at a rate of 4.99¢/kWh – significantly less than other providers, ComEd, or the City of Chicago’s rate of 5.589¢/kWh.

AUS can also negotiate for long-term 24-36 month fixed contracts, providing a long-term hedge against rising electric rates.

And if you heat your condo with electric space heat, AUS has a private opt-in aggregation program that can save you significantly over the City of Chicago or ComEd residential rate. Contact us for details on how to join and save money this coming winter.

Picture this…

It’s June 2014, and you start hearing people around you complaining about how their electricity bills shot up overnight. You see the complaints in newspaper articles and on the television news and people everywhere looking like they’ve been taken totally by surprise by the rising City of Chicago electric rate of 6.5¢ or more. People start scrambling back to the utility, only to discover that their rate has gone up, too.

And while the rest of the Windy City seethes in a quiet helpless frustration, you simply smile because you read this article and took its advice.

For more information on how to join a non-government private aggregation program for regular or electric space heat customers, contact us.

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