Electric rates not locked in for Champaign residents
CHAMPAIGN — Residents west of Wright Street will want to pay close attention to electric prices during the next few months to make sure they're getting the best deal come July.
While Urbana locked in a price last fall for its municipal electric aggregation program, Champaign city officials are biding their time looking for the best deal. But it is not clear what that price will be, or whether it will be better than Ameren Illinois' default price.
That ultimately means residents will want to look carefully at their options when they receive letters from the city informing them of their opportunity to opt out of the program this spring.
Both cities have good prices right now under municipal electric aggregation contracts they signed two years ago, but those agreements expire in June. Electric prices for most customers in Urbana will go up 17 percent in July under a new two-year deal it signed in the fall, but that price is still expected to be lower than what those residents would be charged under Ameren Illinois' default price.
Champaign public works spokesman Kris Koester said his city is waiting for when it thinks it can get the best deal. Officials are ready to lock in a price whenever they think the timing is right, and that could be anytime between now and early May.
That is "so we have time to get the best bid," Koester said. "The way this is changing, municipal electric aggregation, they have price fluctuations all the time depending on what the going rate for energy is."
That means uncertainty for what Champaign residents will end up paying in July, and Koester said city officials have not ruled out the possibility they will not be able to get a price any better than the Ameren Illinois default rate — which would make the savings touted under municipal electric aggregation nearly zero.
Experts knew early on the savings under municipal electric aggregation would be short-lived. The program, which allows a city or municipality to act as a broker for its residents' electricity rate, was enabled under state law recently.
Champaign and Urbana started their programs soon thereafter in July 2012. Since then, Champaign residents have collectively saved about $2 million on their power bills and Urbana residents have saved roughly $1.3 million.
Those savings will be much smaller during the next two-year period as Ameren's default price comes down and municipal aggregation rates go up. Urbana residents under the city's program will pay 4.746 cents per kilowatt hour when the new contract begins in July. They're paying 4.055 cents right now.
Compare that price to Ameren Illinois' current default rate of 4.957 cents per kilowatt hour, which is what most residents would be paying if they weren't on the city's program. Summer default rates will be announced in May, and they'll likely come down more.
Predicting what the market will do is an inexact science. Most Champaign residents are paying 4.315 cents per kilowatt hour now. That's likely going up in July, but how much is anyone's guess.
Tom Leigh, director of Midwest sales for Good Energy, said there has been a general upward pressure on power prices during the past few months. Some of that is due to the severe weather, but other factors include increasing regulation on fossil fuel pollution and retiring of aging Midwest power plants.
"Those factors, we expect to persist beyond this severe weather period," Leigh said. "We continue to see some continued upward pressure."
But "the market is what it is," he said. What matters is the price when you lock in — rates are expected to increase over the long-term, but that doesn't mean there is a guarantee they'll be higher a couple months from now.
"Even if we forecast upward pressure, that doesn't mean the prices don't bounce around because they do," Leigh said.
Leigh's company, Good Energy, acted as a consultant on Urbana's contract for bids last fall. Good Energy pools cities to increase buying power — Champaign County, Savoy, Mahomet, Normal, Decatur, Peoria and others were included with Urbana in that pool last fall.
"We track it every single day," Leigh said. "We update the new data when it comes in. We felt in the fall that there was enough indicators to recommend to the communities that this was a very good buy."
Champaign city officials chose not to go that route. "It's not a matter of being right or wrong," Leigh said.
"We never gamble," he said. "We basically help our clients to make the most informed decision that we can."
Urbana's contract with its supplier, Homefield Energy, includes a "meet-or-beat" clause, which allows the city to request a lower price from the supplier or leave the contract if the Ameren default rate dips below the city rate. Urbana customers will also be able to leave the city program at any time without penalties.
Whether Champaign customers will enjoy the same luxuries will depend on the contract the city has yet to sign.
Just like in spring 2012, residents in both cities will have the opportunity to opt out of the program before the new prices take effect.
Ameren offers additional programs that could save residents' money — real-time Power Smart Pricing for one, and discounts for others who meet certain conditions.
Under Power Smart Pricing, customers' power rate changes by the hour and depends largely on demand. At 1 p.m. Wednesday, for example, the price was 3.5 cents per kilowatt hour. At 5 p.m., it was 7.3 cents. Those prices are displayed at powersmartpricing.org and gives customers the ability to concentrate their electricity use during off-hours when prices are lower.