Electricity pricing program may fizzle
CHAMPAIGN — Unsure about whether they can actually offer a better deal for residents, city council members tonight could decide to discontinue Champaign's electric pricing program when it expires in June.
They could also choose to continue it, but there's no guarantee that residents who stay in the municipal electric aggregation program will be paying less on their monthly power bills. In fact, there's a good chance they could end up paying a bit more for the next year or so, like they already have been for the past 10 months.
Regardless of what they do, the decision will be up to individual electric customers. They will have the opportunity to opt out of the program if city officials decide to renew it. If the city program ends, electric customers will be free to search for their own rate on the open market or do nothing and pay Ameren Illinois' default price.
The only thing that's virtually certain is that electric prices will rise this summer. The city council will consider how to proceed when it meets at 7 tonight in the Champaign City Building, 102 N. Neil St.
Overall, residents who participated in the city's program for the past 22 months — which is nearly everyone — have still saved money on their electric bills since municipal electric aggregation began in Champaign in June 2012. More than 30,000 customers collectively saved about $1.6 million, according to Champaign public works spokesman Kris Koester.
The program gave city officials the authority to essentially act as a broker for residents' electric rates by going out to market for a deal instead of sticking with the default rate charged by Ameren Illinois.
But since the beginning, city officials knew the savings would be short-lived as Ameren prices were projected to drop. And they have dropped to the point where the program may no longer be beneficial to residents in the immediate future.
"When the program started, there was definitely the option there to save money," Koester said. "We were also getting 100 percent renewable energy" credits.
Urbana has the same program, and city officials there have already chosen to push ahead with it. Mike Monson, the chief of staff to the Urbana mayor, said the city looks at it as a "two-year hedge" against fluctuating electric rates.
"It's protection in case rates continue to increase over the next couple of years, which we expect they will do," he said.
The rate Ameren charges has dropped for a number of reasons since the two cities' electric programs began, but a big factor driving the difference is called the "purchased electricity adjustment." Ameren charges a default rate for electricity it supplies and then each month applies the adjustment, a number set by the Illinois Commerce Commission.
That adjustment can either be a surcharge or a credit to customers, depending on the month. It's meant to "true up" the price Ameren pays for the electricity with what it charges when it turns around and sells to customers.
By contrast, the city's rate is set by contract with a retail electric supplier independent of Ameren Illinois. It's a fixed price, and although the contract requires the electric supplier to meet or beat the Ameren default rate, it does not require the supplier to match the purchased electricity adjustment.
Since June 2011, the Ameren price adjustment has been a credit to customers — and it became a credit so large that, in June 2013, the Ameren price actually dropped below the price paid by customers in the city's program.
Here's how the numbers break down this month: Customers in Champaign's municipal electric aggregation program are paying 4.315 cents per kilowatt hour. Customers who opted out of the city program are paying 4.124 cents — that's a default rate of 4.803 cents with a 0.679-cent credit.
City officials in Champaign expect that to be roughly the case for the next 12 to 14 months, Koester said, and it has them re-evaluating municipal electric aggregation as they look at whether to renew the program when it expires in June.
Urbana is choosing to stay the course. Electric rates there will go up 17 percent this summer regardless, but Monson said he expects the city's rate of 4.74 cents per kilowatt hour should still rival the Ameren price, which also is expected to rise.
Champaign received bids higher even than Urbana's new price coming this summer. Suppliers said they would sell electricity to Champaign residents at a minimum of 4.90 cents, and some bids were considerably higher, according to city documents.
In the first year, Monson said, Urbana's program versus the Ameren price could be "fairly close to break even, give or take a tenth of a cent." But he thinks there will be an opportunity for savings in the city's program in the second year of its contract.
Residents may opt-out of the Urbana program before it is renewed this summer, or they may drop out at any time.
"There's no penalty to switch," Monson said. "If they think the trend is a better deal, they can go there. But there's a lot of uncertainty about rates."
He said environmental regulation and anticipated closings of coal plants will start to come into play soon and affect the market for electric prices.
"We got a good rate that's locked in for two years," Monson said. "We think there's still an environment of rising rates right now."
He pointed out also that Urbana city officials chose to purchase electricity with 100 percent renewable energy credits, which added a 0.17 cent premium to the city's price.
"Our price includes 100 percent renewable energy credits to offset the greenhouse gases produced by Urbana residents' electricity use," Monson said.
That may come into consideration in Champaign, too. It will be a value judgment by the city council, Koester said, "if council decides that renewable energy is something that's more important and that we should pay a different rate."