Between 2010 and 2012, voters in over 650 communities granted their local government with the authority to negotiate electricity supply contracts on behalf of their residential and small commercial accounts. Approximately 70% of ComEd and Ameren residential customers have been served through municipal aggregation programs. Recently, the Price to Compare for Ameren and ComEd has dropped causing municipal aggregation program savings rates to shrink or disappear altogether. Currently, about 20% of all aggregation communities have decided to return their residents to standard utility service because their aggregation programs could not achieve cost savings.
In addition to the poor optics of lower savings rates, these aggregation communities will face the new challenges as they reenter the electricity supply markets:
- Rising electricity prices. The historically low electricity rates to which residents in the ComEd region have become accustomed have risen since June 2014. The increases are due to scheduled increases in payments to power plant operators to ensure that generation assets are available to meet the region’s peak electricity demand.
- Changing rate structures. Tariff changes have increased rates for larger-than-average accounts, and reduced rates for smaller-than-average accounts. Given the lower comparative Price to Compare, these rate changes for aggregation programs have further reduced residents’ savings.
- New Illinois Commerce Commission rules. The Commission has created a series of new reporting and notification requirements for electricity suppliers that serve aggregation programs. In order to ensure that suppliers provide service and comply with the rules, aggregation program management require substantive changes.
The combination of rising prices, tariff uncertainty, and regulatory requirements create a challenging environment for aggregation programs. To determine aggregation program viability, communities should first consider the following:
- Conduct a program review before pricing. A critical review of the program’s policies will establish how well a community can adapt to new market realities. Engaging an outside party will validate the recommended changes that should be completed prior to committing to any new pricing offers.
- Consider alternative pricing options. Most aggregation programs offer a simple fixed price, but residents may see more value from alternative rates. Communities with Smart Meters can offer one electricity price for weekdays and another (lower) price for evenings and weekends.
- Pursue energy demand management services. The aggregation statute allows programs to secure energy efficiency services as well as electricity supply. Aggregation programs can be used to secure energy efficiency funding for residents through the utilities and the Illinois Department of Commerce and Economic Opportunity.
- Factor non-pricing value. Cost savings are important, but aggregation communities should reference the non-price benefits that the programs provide residents, such as:
- Consumer Protection. Residents that have an aggregation program option are less vulnerable to predatory door-to-door and telemarketing sales campaigns.
- Preferred Contract Terms. Residents that have an aggregation program option are less likely to be subject to bothersome contract terms such as cancellation penalties, minimum credit requirements, and dual billing.
- Sustainability. Aggregation programs have provided residents with more sustainable energy options when they have elected to surpass the minimum requirements of the Illinois renewable portfolio standard.
As electricity choices grow more complex, residents will continue to look to their local leaders for guidance and assistance. With thoughtful planning, aggregation programs can remain viable during this challenging period and continue to provide value for residents.