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Emanuel defends choice of Integrys for city electrical supply

Mayor Rahm Emanuel

Mayor Rahm Emanuel

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Updated: January 12, 2013 6:14AM

Mayor Rahm Emanuel said Monday he chose Integrys Energy Services to serve as the lone supplier of electricity to 2.7 million Chicago customers to maximize consumer savings.

Three days after Integrys won the high-stakes competition, Emanuel defended his decision to replace one supplier monopoly, ComEd, with another.

“It came down to better pricing and better savings for the consumer. . . . We’re the biggest city to do this. I want residents of Chicago to get what residents of the suburbs have been getting,” he said.

Emanuel said the average Chicago household will save 10 percent over the two-year life of the contractk, with an initial savings of 25 percent between February and June.

“For a lot of families who live paycheck-to-paycheck, that’s a significant savings. And I wanted to make sure we have . . .t he best price and the best service. It was a competitive process. It came down to two companies. And they were selected for that purpose,” he said.

He noted that the agreement will eliminate coal from the fuel mix used by Integrys, which already supplies electricity to 46 communities, including Oak Park, Oak Brook, Lincolnwood, Vernon Hills, Hickory Hills and River Forest.

“That’s also an additional benefit. But price is the No. 1 goal and that was the No. 1 goal that was achieved,” he said.

On June 1, 2013, ComEd’s higher-than-market-rate electricity contracts signed with Ameren in 2007 will expire, and supply prices are expected to drop.

That’s why the Integrys contract requires the supplier to “beat or match” the price charged by ComEd even if its rates go down.

“We believe we can compete with the utilities. They are out buying contracts to provide supply as part of their portfolio. We believe we can do that as good, if not better. And I believe that our cost structure is in line or, in some cases, better than the utilities,” said Dan Verbanac, president of Integrys Energy Services.

Under questioning from aldermen, Verbanac pegged total revenues from the Chicago contract at $300 million before energy supplies are purchased.

Minorities will get a 25 percent share and women a 5 percent share of the “non-commodity portion” of the agreement or up to $15 million. Among them is former Chicago Bears Super Bowl XX MVP Richard Dent, whose company, RLD Resources, is working in partnership with Integrys.

Michael Negron, the mayor’s point man on the electricity issue, projected the total savings over the two-year life of the contract at $125 million and $130 to $150 for individual households.

“We moved as quickly as we could,” Negron said, acknowledging that the savings would have been greater if Chicago hadn’t been so late to get on board.

What happens when the contract expires in May 2015?

“We’ll have to see whether people are happy with it and what the rates are,” Negron said.

“We could try to either renew the deal with Integrys — and that would require going back to [City] Council. We could put it out for bid again. . . . Or we could let it lapse if the ComEd rate looks better or it looks like it would make more sense for the city to get out of the business of doing this. . . . It’s not locked yet. What we want to do is capture the savings opportunity . . . and retain the flexibility to determine at a later time” what makes sense.

Integrys is a publicly traded company with a market valuation of $4.1 billion. The company owns six regulated utilities that provide natural gas and electric service, including Peoples Gas and North Shore Gas.

Last Friday, the Emanuel administration chose Integrys to serve as the lone supplier of electricity to 2.7 million Chicago customers and projected an initial savings of up to 25 percent.

Chicago residents and small business customers will automatically transition to Integrys unless they choose to opt out, either by phone, mail or online. Every eligible customer will receive an opt-out letter from the city and get 14 days to drop out.

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