Emanuel backs buying electricity in bulk for Chicagoans
BY FRAN SPIELMAN City Hall Reporter email@example.com June 20, 2012 11:50AM
Comed's Taylor Street substation in Chicago. Sun-Times Media file photo.
Updated: July 23, 2012 7:16AM
Mayor Rahm Emanuel launched a power play Wednesday that would have Chicago buying electricity in bulk to cut utility bills for the city’s nearly 3 million residents.
“Buying in bulk can save homeowners and residents money. Therefore, I’ll support putting it on the [referendum] ballot and I will advocate for it,” the mayor said.
Short-term, the move will save Chicagoans money — about $130 in the first year, according to the Citizens Utility Board.
But the window of savings is likely to close come June 2013. That’s when Commonwealth Edison’s higher-than-market-rate electricity contracts expire, and supply prices are expected to drop.
“We don’t know if other companies will be able to compete with ComEd’s rate next year,” said Citizens Utility Board spokesman Jim Chilsen.
The City Council’s Finance Committee is set to vote Friday on whether to put a referendum on the November ballot on the complex issue of electric-supply competition, commonly known as “municipal aggregation.”
The resolution is sponsored by the City Council’s two most powerful aldermen: Finance Committee Chairman Edward M. Burke (14th) and Ald. Pat O’Connor (40th), the mayor’s City Council floor leader.
If the City Council puts shopping for electricity on a fast track, a handful of people stand to benefit financially, including former Cook County Commissioner Joseph Mario Moreno.
Moreno serves as general counsel for Illinois Energy Aggregation LLC, a company whose top officials pitched the referendum idea to Burke, Moreno’s political ally. Moreno acknowledged Wednesday that the aggregation business would be lucrative if his company is chosen as a consultant to help the city with the aggregation process.
“There’s no guarantee we would be selected,” Moreno said. “You’re way ahead of yourself. There’s gonna be plenty of companies competing for this business.”
If Chicago approves the referendum and the city negotiates a better deal than ComEd’s existing rates with a rival power supplier, Chicago would become the nation’s largest city to jump to a new electricity provider, experts say. The next-largest city to abandon its incumbent supplier is Cincinnati.
ComEd, which lobbied hard in favor of state legislation that allowed municipal aggregation, said Wednesday that it supports competition.
But Chicago accounts for about one-third of ComEd’s residential power demand, and the loss of such a huge customer could force the utility to raise prices to provide services to a shrinking customer base. ComEd doesn’t buy its own power supply; that is done by an independent agency called the Illinois Power Agency.
Consultants who advise municipalities about electricity buying said Chicago could negotiate a contract that would release city residents from a deal as soon as ComEd offers lower rates than the ones negotiated.
Many existing municipal contracts call for the new electric provider to meet ComEd’s rates, should ComEd’s rates go lower than the existing ones, or return the customers to ComEd, said Mark Pruitt, program manager at the Illinois Community Choice Aggregation Network, which gets paid to consult municipalities on negotiating the best rates and terms.
Municipalities may insist that no fee be charged with any such contract exits.
It is imperative for Chicago to move quickly, said David Kolata, executive director of CUB.
“The market price right now is significantly below where the ComEd energy price is,” he said. “That’s created head room so competitors can come in and undercut it.”
“... I would be hesitant to sign anything for longer than two years because of all the uncertainty. We don’t know what ComEd’s prices will look like after that, but we expect it to be significantly lower.”
Contributing: Staff Reporters Sandra Guy and Tina Sfondeles