March 2012 Primary: Electric Aggregation Referendum

An electric aggregation program sounds complicated, but it is not.

The program is a way for villages, cities and counties to work together to get a better electric rate as a group rather than to negotiate individually.

Still, there are questions about how it works. The village of Huntley provides residents with more information on its website. Here is a look at some of the most common questions:

Q: What is municipal electrical aggregation?

A: Municipal electrical aggregation is the easiest and safest method for a municipality to reduce residents’ ComEd bills. It allows local governments to bundle — or aggregate — residential and small commercial retail electric accounts and to seek bids for a lower-cost source of power. This type of program will address only the electricity supply costs for a community’s residents and does not, in any way, modify or reduce the associated distribution costs that are charged on their electric bills by ComEd.

Q: How does the electrical aggregation process work?

A: Under state law, a municipality must place a referendum on the ballot to ask its voters to give the municipal government the authority to aggregate electric accounts and seek bids for power generation. Assuming voters approve the referendum, the municipality then must hold at least two public hearings to discuss and create an aggregation plan. Once the plan is in place, municipal staff, with the assistance of energy experts, will prepare and publicize a request for proposals. Only energy suppliers certified and regulated by the Illinois Commerce Commission may respond. The bid that comes closest to achieving the goals of the aggregation plan would be accepted. However, if none of the bids meets the plan's goals, there would be no obligation to accept one, and the aggregated accounts would continue to receive power from ComEd at prevailing rates. A resident or small business would have no obligation to participate and could choose to opt out of the program altogether.

Q: How does electrical aggregation affect me?

A: Aggregation will have no impact on you as an individual beyond the cost savings you will receive by participating. Three companies are involved in electrical power:

• Generation companies generate electric power. Aggregation has no impact on them.
• Supplier companies purchase power from the generators for resale. Aggregation solely affects your relationship with the supplier by letting the village arrange for the supply of electricity for all residents in the village.
• Distributor companies are responsible for operating the grid that brings power to your home. ComEd is the transmitter for most of northern Illinois. Aggregation has no impact on the distributor companies. The only relationship that changes is the supplier. Therefore, you will not see a change in service — just a change in the cost of purchasing power.

Q: Do I have to participate in aggregation?

A: No. If this referendum passes, that means that the village may bid on behalf of the residents to get better electric supply rates. If the village does find a favorable rate and decides to proceed, all residential and small commercial electricity users will be included in the customer base unless they actively choose not to participate. That means that you still have the option to opt out of the program when the village notifies residents of its choices.

Q: If I choose to opt out of the program, do I have an option to opt back into the program?

A: Yes, a resident would be able to opt back into the program by contacting the supply company and enrolling.

Q. If I am with another supplier, may I join the village’s program?

A: If you already have chosen an alternative retail electric supplier, you will not receive an opt-out notice and are not eligible to be included automatically. The village cannot interfere with a contract you freely entered into with an alternative retail electric supplier. You will need to be aware of any obligations in your current agreement; many include an early termination fee.

Q: What are the benefits of electrical aggregation?

A: The most important benefit is the opportunity for residents and small businesses to save money on electric supply rates.

Q: Can savings be guaranteed under an aggregation program?

A: A municipality can structure its request for proposals so that bidders set their rates at a specified percentage under ComEd's established rate. Market fluctuations make it impossible to guarantee that bids would come in under the energy rate paid by ComEd customers. However, since that rate is set every May, the market can react to it and often provide a lower rate. Right now, residents and small businesses pay a higher rate than most large commercial, industrial, and institutional accounts that have sought open-market bids.

Recent studies show the average rate achieved to date for municipal aggregation has been $0.059 per kilowatt-hour, a reduction of 23.2percent when compared with the ComEd rate. In dollar savings, residents with 500 kilowatt-hours of demand would save $8.96 per month or $107.55 per year, while residents with higher demand that utilized 1,500 kilowatt-hours per month would save $26.88 per month or $322.52 per year.

Q: What happens if a municipality cannot purchase or negotiate lower rates than ComEd?

A: Your account would stay at ComEd, and ComEd would remain both the supplier of your power and the distributor of your power. Either way, ComEd would be your distributor.

Q: If aggregation means lower energy costs for customers, wouldn't ComEd simply increase charges on the distribution side to protect its profit margin?

A: ComEd owns the distribution system only and so does not realize profits or losses from the sale of energy. ComEd has worked for several years with large commercial and industrial customers who have switched to third-party energy suppliers and remains supportive of other customers who switch to third-party suppliers. In other words, there would be no impact on distribution rates. Illinois Commerce Commission regulations dictate that ComEd cannot introduce any separate distribution fees on municipalities that aggregate.

Have more questions? Check out the village's website for more answers.

Source: village of Huntley