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City’s bulk electricity plan going to referendum

Power lines Lake County. | Michael Schmidt~Sun-Times Media

Power lines in Lake County. | Michael Schmidt~Sun-Times Media

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Updated: July 24, 2012 9:48AM

Chicago voters will get a chance to weigh in on Mayor Rahm Emanuel’s plan to shop for electricity in bulk to cut utility bills when they go to the polls in November.

The City Council’s Finance Committee agreed Friday to put the referendum on the ballot, the first step toward making Chicago the nation’s largest city to jump to a new provider.

The resolution was co-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.

Testifying in favor of the referendum was former Chicago Bears great and Super Bowl XX MVP Richard Dent, whose company RLD Resources is working in partnership with Integrys Energy Services, one of Edison’s chief competitors.

“The type of savings you’re looking at is $20 million-a-month that residential customers can have back at their homes,” Dent said.

“If the city would have went out [to bid] on the first of January, you would have been looking at a savings of $30 million-a-month. … This is very time sensitive. …The more time it takes…your voters are losing money that could be in their pockets. …With today’s economy, $200 or $300 bucks would be a lot” of savings for individual consumers.

Ron Cardwell, vice-president of Integrys Energy Services pegged the savings to Chicago residents at $200 million.

“That money goes right back into communities that folks can use to pay for gas and savings. It’s really like an economic stimulus,” Cardwell said.

Prior to the final vote, aldermen were assured that, even if the referendum passes, individual residents would be able to “opt out” of the bulk purchase without penalty.

Burke noted that Chicago has “already lost a lot of time” by not putting the referendum on the ballot last March, like scores of suburbs did.

“We’ve been behind the curve. Other cities around the state have forged ahead. …It’s something that, I think, our constituents can save money and, if they can, why not?...[But] the devil is in the details,” the chairman said.

Burke added, “I’d like to know what is bad about this. It just sounds too good to be true. ... We ought to start working on this now and preparing for it if the voters tell us in November they want to go ahead with this. It can save the power customers money and could possibly provide additional funding for the city.”

The alderman was apparently referring to the possibility that City Hall could take a portion of the savings, instead of passing it all along to consumers.

The ballot question will read, “Shall the City of Chicago have the authority to arrange for the supply of electricity for its residential and small commercial retail customers who have not opted out of such program?”

O’Connor was asked whether Chicago voters understand the complex issue of “municipal aggregation” enough to cast an intelligent vote.

“What education do they get to vote on a president? They get commercials and they get debates. I mean, please. This is a lot less complicated than the leaders of our country and they vote on that every day,” O’Connor said.

“Our constituents have an opportunity to say, ‘Do you want us to try and save you money or not?’ Maybe they’ll trust us enough to do it. Maybe they’ll say, ‘Keep your hands out of my pocket. I’ll do my own rates.’….Chicagoans are as smart as a lot of the suburbanites. We can figure it out.”

Shopping for electricity was put on the fast-track in Chicago, thanks to Emanuel’s surprise endorsement earlier this week.

“Buying in bulk can save homeowners and residents money. ... I believe it will lead to lower utility rates for our residents. It has worked in other places,” the mayor said.

Nearly 200 municipalities around the state are already shopping for energy on the open market.

The timing has everything to do with the long-term power contracts that ComEd signed with Ameren in 2007. Since then, supplies have increased dramatically, while demand has dropped. That has created head room for competitors to undercut ComEd’s energy price.

But there’s a catch: The savings are only guaranteed through next June, when Edison’s long-term agreements with Ameren are due to expire. 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,” he said.

“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 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.

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.

But there’s a potential downside: Chicago accounts for about one-third of ComEd’s residential power demand. The loss of such a huge customer could force the utility to raise prices to provide services to a shrinking customer base.

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