Cities look anew at electric aggregation
URBANA — City officials in both Champaign and Urbana say their municipal electric aggregation programs — now more than 1 year old — are still saving residents money on their power bills, but the programs' futures are less certain now than when they began.
Urbana City Council members on Monday night heard from a consultant that has acted as its broker for residents' electric prices for more than a year. Meanwhile, Champaign City Council members plan to meet at 7 p.m. in the Champaign City Building, 102 N. Neil St., to discuss where to go from here with its program.
Champaign residents pay more for their electricity than do Urbana residents — 4.315 cents per kilowatt hour in Champaign compared with 4.055 cents in Urbana. The difference is largely because of a rate increase that Champaign's electric supplier, Integrys Energy Services, passed on to customers in June. Urbana's supplier, Homefield Energy, chose not to increase rates.
The programs have saved customers as a whole $1.6 million in Champaign and more than $1.1 million in Urbana. And both prices are still lower than the Ameren Illinois default rate, 4.68 cents, which is what residents in both cities would pay if the electric aggregation programs did not exist.
But that default price was almost one full cent higher when the programs began a year ago. As the gaps between the default price and market prices narrow, officials in both cities say they need to keep a close eye on the market to make sure residents are getting the best deals.
"The gap has closed," said Urbana Chief of Staff Mike Monson. "We knew it was going to be a short term gap, like a one- or two-year gap."
Municipal electric aggregation, which voters approved in March 2012, authorizes cities to act as broker for residents' power rates. Both cities contracted with alternative electric suppliers at lower prices and gave residents the opportunity to opt out of the program.
The vast majority of residents chose not to opt out and were signed up for the municipal electric aggregation program. Their electric bills still come from Ameren Illinois, which is responsible for delivering the energy, but the company that actually generates the power is different.
The contracts between the cities and their electric suppliers are set to expire in June 2014, and they are starting to look for new contracts now. Those contracts, for the most part, lock in electric rates until the end of the contract term while the default price fluctuates.
Both cities are looking to include a "meet or beat" clause in their contracts to ensure that the market price residents pay is never higher than Ameren Illinois' default rate, should the default rate dip below the negotiated rate.
"It seems to me that we're gambling about the future just the way that farmers do all the time," said Alderman Eric Jakobsson, D-Ward 2.
Urbana uses a consultant, Good Energy, to negotiate its contract. Tom Leigh, director of Midwest energy sales for Good Energy, said he foresees upward prices in the future and the city should look to lock in a rate sooner rather than later.
"Now is a good time to buy," Leigh said.
Good Energy uses its "tremendous buying power," he said, to get what it thinks is the best rate — electric suppliers bid on a pool of Good Energy clients, more than 100 at a time. Urbana likely will be in that pool when Good Energy seeks bids later this year.
Champaign officials explored joining that pool but are still unsure if it's the best option for Champaign's situation, as University of Illinois students leave during the summer, giving the city an unusually low summer electric load.
"This load characteristic may provide the city a unique advantage when bidding," according to city documents. "That advantage would not be realized if Champaign was pooled in a much larger group of communities with typical higher summer electricity usage."
Good Energy adds a small amount to customers' rates as a fee. Champaign officials expect that would total about $112,500 per year, and city officials say that is higher than the $75,000 they would expect.
The cities also take a chunk of the money — that was $100,000 annually in Champaign. Urbana's add-on was an extra 0.1 cents per kilowatt hour on residents' rates, Monson said.
In their last contracts, both cities purchased electricity using 100 percent renewable energy credits.