Emanuel’s plan to shop for electricity in bulk on fast track
BY FRAN SPIELMAN City Hall Reporter firstname.lastname@example.org October 22, 2012 11:47AM
Sun-Times Media file photo
Updated: November 24, 2012 6:10AM
Mayor Rahm Emanuel on Monday outlined a two-step, competitive bidding process for shopping for electricity in bulk, hired a pair of consultants to evaluate the potential consumer savings and scheduled four public hearings to persuade voters to approve a Nov. 6 referendum.
If Chicago voters give the go-ahead, it will be incumbent on Emanuel to move quickly to jump through a fast-closing window to reduce utility bills.
That’s apparently why the mayor isn’t waiting. He’s outlining a two-step competitive bidding process to guarantee “the best savings and energy package.”
He’s scheduling four public hearings — beginning Tuesday and continuing through Nov. 1 — to educate residents about the benefits and encourage them to support the referendum.
And apparently anticipating passage, City Hall has hired a pair of consultants — the Delta Institute and former Illinois Power Agency Director Mark Pruitt — to assist the city in evaluating the potential to lower electric bills.
The Delta Institute has also been asked to “engage stakeholders to identify opportunities for investing some of the anticipated savings into cleaner energy or improved energy efficiency,” according to a press release distributed by City Hall.
“Municipal aggregation can potentially bring meaningful savings to Chicago ratepayers and small businesses through lower monthly electric bills and can help us increase our investment in renewable, clean energy sources,” the press release quoted Mayor Rahm Emanuel as saying.
“This would be a win for homeowners, a win for small businesses and a win for clean energy. I hope the voters of Chicago will join me in supporting this important referendum, so that we can continue exploring the potential.”
Until Monday, City Hall had shed no light on how it planned to structure the competition to replace Commonwealth Edison, nor would it say whether energy efficiency would be built into the energy sweepstakes.
Now, it’s clear that energy savings will be a pivotal part of the mix. And the competition will begin with a so-called “request for qualifications” (RFQ), followed by a “request-for-pricing” (RFP) that will be released “as soon as possible,” if the Nov. 6 referendum is approved.
Mayoral spokesperson Kathleen Strand was asked whether Chicago would look to identify a single provider or whether the city would be divided into service areas, each with its own provider.
“We are open to whatever combination of providers delivers the most savings while preserving quality and continuity of customer service to Chicago ratepayers,” she said.
“The RFQ we issue will help us determine the capacity of potential bidders to handle a customer base the size of Chicago’s and will make our decision on this question following an open and competitive bidding process.”
Strand said the city has no intention of reserving some of the millions of dollars saved to shore up the city budget.
The Delta Institute is described as a “center of innovation that creates market opportunities to achieve environmental sustainability” and economic development. Pruitt served as the Illinois Power Agency’s director from 2008 through 20011 before organizing the Illinois Community Choice Aggregation Network.
Five months ago, Emanuel threw his support behind the referendum, setting the stage for Chicago to become the nation’s largest city to jump to a new electric provider.
The Citizens Utility Board has estimated that participating residents can save $9 to $14 a month until June 1, 2013, when the window of savings is likely to close.
That’s when Edison’s higher-than-market-rate electricity contracts signed with Ameren in 2007 expire, and supply prices are expected to drop.
That makes it imperative for Chicago to move quickly, according to David Kolata, executive director of the Citizens Utility Board.
“You’re gonna want to get to market as quickly as you can and lock things in. We know what the price is through June, and there’s a good opportunity to save. If it drags out beyond June, the opportunity for sure savings becomes less and less,” Kolata told the Chicago Sun-Times earlier this year.
“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.”
Kolata has cautioned Chicago to carefully structure its request for proposals to get consumers the best value and to take a “more creative approach” than some suburbs have taken.
“You could write an RFP that bundles in energy efficiency — anything from home retrofits to street light improvements — and use the bulk buying power of the city to leverage additional value. The best way to save money in the medium and long-term is to improve the energy profile of city,” he said.
ComEd lobbied for state legislation that allowed municipal aggregation and “supports and encourages customer energy shopping,” the city’s press released quoted Com Ed President and CEO Anne Pramaggiore as saying.
“No matter who supplies the power, our role is to deliver the electricity to homes and businesses. Customers who switch to another supplier will see no change in their service from ComEd,” Pramaggiore said.
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.
Consultants who advise municipalities about electricity buying have 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, Pruitt told the Sun-Times earlier this year. Municipalities may insist that no fee be charged with any such contract exits.
Individual residents would be able to “opt out” of the bulk purchase without penalty.
The public hearings will be held from 7 to 8 p.m. on Tuesday at Arturo Velazquez Institute, 2800 S. Western; Thursday at Kennedy-King College, 6301 S. Halsted; Oct. 30 at Truman College, 1145 W. Wilson, and Nov. 1 at Wright College., 4300 N. Narragansett.