Why the city wants to negotiate your electric rates

A few readers have asked me why the cities of Champaign and Urbana want to be involved in negotiating residents' electric rates and, I'll be honest, I didn't really have an answer. There's no discernible direct benefit for the cities, but a few people had a hard time believing that city officials have a purely altruistic motive in this.

So I emailed Champaign Planning Director Bruce Knight to ask, "What's in it for the city?" Here's his response:

"The reality is that what is in it for the City is to get our expenses reimbursed. City Council voted to put this on the ballot because they saw it as a service that could be provided to their constituents, a way to reduce their expenses. The fact is that only a small percentage of the population takes advantage of lower energy prices that are available. The Ameren default rate is not a very competitive price, but few people bother to pursue the better prices that are out there. That is human nature. This program allows people to judge for themselves if the price is better and opt out if it is not. However I can assure you and your readers that the City will only accept a bid if it provides savings. You should also know that the City has been bidding out our own electric supply for a couple of years and been very successful at saving money on our own energy (which already saves taxpayer money)."

That's the end of Knight's response, but I'll also propose that there might be an indirect benefit to the cities. City of Urbana officials estimate that, in the first year alone, municipal electric aggregation could save 20,000 households in Urbana a collective $1.4 million. I've seen no such estimate for Champaign, a city with twice the population of Urbana -- but you can do the math.

At least in Urbana, that's another $1.4 million that, theoretically, residents can spend at restaurants, bars and retail stores. And that, theoretically, means more sales tax revenue and more food and beverage tax revenue for the city. Maybe it's a stretch, but you might see it as a kind of mini-stimulus.

Consumers need to be aware of the specifics, though. I'll have more details about this in Tuesday's newspaper, but a nonprofit watchdog group called Citizens Utility Board put together a fact sheet about municipal electric aggregation. They are neutral on the topic and suggest that it is a good option for a lot of people, but they are reminding customers throughout the state that there are alternatives to joining the cities' groups.

Questions or comments? Please feel encouraged to contact me by commenting below, email or Twitter.

 

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