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Suburbs shed ComEd
August 17, 2011 — A growing number of Chicago suburbs, including well-known municipalities like Oak Park and Oak Brook, are cutting the cord with Commonwealth Edison Co. and inking money-saving electricity deals with alternative suppliers on behalf of their residents and small businesses.
By Steve Daniels, Crain's Chicago Business The latest to defect is west suburban North Aurora, which knocked 26% off ComEd's price of electricity in a two-year contract with Integrys Energy Services, a sister company of Chicago-based Peoples Gas. Ten other small, far-flung suburbs, including south suburban New Lenox and west suburban Sugar Grove, have signed deals in recent weeks providing similar savings. Some 20 Chicago-area municipalities have won voter approval in referendums to solicit bids from power suppliers. Together they represent about 90,000 ComEd customers, about 3% of the utility's 3.8 million. But with bigger cities interested in moving forward, as much as 20% of ComEd's customers could move to alternative suppliers through municipal contracting, said Mark Pruitt, executive director of the Illinois Power Agency, which buys electricity on behalf of the state's utility customers. Such a wave of deals would accelerate the shift of customers to alternative electricity suppliers in a market where ComEd still controls all but a tiny fraction of retail accounts. The contracts show the advantage towns and villages, buying collectively on behalf of their residents and businesses, have over individuals who shop for alternatives to ComEd. Suppliers are offering individual savings between 10% and 15% from ComEd's power charge, which accounts for about two-thirds of the normal electric bill, far less than the 20%-plus savings towns can extract. Oak Park and Oak Brook are getting ready to solicit bids, offering blueprints for larger municipalities to follow. Buffalo Grove is leading a group of large northwest suburbs that want to band together, said John Kelly, executive director of the Chicago-based Galvin Electricity Initiative, a non-profit started by former Motorola Inc. CEO Robert Galvin to promote clean energy, energy efficiency and a more sophisticated power grid. “We think another 20 to 30 cities are going to come out in this next round,” Mr. Kelly said. Suppliers are willing to offer much better prices to towns that negotiate on behalf of their residents, because the bulk deals eliminate the cost of marketing to individual customers through mailings, radio commercials and other advertisements. “The biggest piece of it is the customer acquisition costs,” said Brian Bowe, Illinois direct mass market manager for Integrys, which won its first municipal deal with North Aurora. “With an aggregating community, all of that (marketing cost) essentially goes away.” Suppliers will handle much of the logistical details, too, such as sending letters to customers who want to opt out of the deal. That leaves little for the municipality to do other than to negotiate a contract that protects itself and its residents and businesses. How many of ComEd's customers eventually will leave? One big wild card is the city of Chicago, which people familiar with the matter say has looked at soliciting bids for its nearly 3 million residents but isn't actively moving in that direction now. A Chicago Department of Environment spokesman didn't return a call late Tuesday. The Galvin Institute has helped the city of Evanston investigate the process, but its efforts seem to be on hold for now, Mr. Kelly said. Aurora, the state's second-largest city, is looking at following suit, said an energy consultant who has spoken with city officials about leaving ComEd. The bigger municipalities may get in gear after seeing the hefty savings residents in the exurbs are getting. One complication: Higher-than-market energy prices embedded in ComEd's rates, which make it easy for suppliers to beat the incumbent utility, are likely to fall by mid-2013 upon the expiration of power-purchase contracts with ComEd parent Exelon Corp. that were negotiated years ago when prices were higher. That gives towns and cities a short period of time to win voter approval and solicit bids. “After (2013), I'm guessing we see switching die down some,” Mr. Pruitt said. Tweet |