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Sign of things to come? Supplier wants out of community power deal

In an unsettling development in the electric market, an alternative power supplier wants to renegotiate the low price it secured for a Chicago suburb through July of 2015.

Crain’s Chicago Business reporter Steve Daniels broke the news recently: Nordic Energy Services says the “polar vortex” winter jacked up its market power costs and it can no longer support the 4.6 cents per kilowatt-hour rate it now offers to Hinsdale residents. 

Under the terms of the “municipal electricity aggregation” contract it set with Hinsdale, Nordic says local leaders must renegotiate the price, or Nordic has the right to kill  the deal. That’s a far cry from a Nordic release that announced the three-year deal back in 2012. “We look forward to helping the community save up to approximately $3 million a year on their electricity expenses,” a Nordic official said at the time.

If there’s been one success story in electric choice in Illinois, at least in the short term, it’s been “municipal aggregation.” That’s where community leaders can negotiate power prices on behalf of their residents with a ComEd or Ameren competitor. Last year, in its electric competition report card, CUB estimated that electricity choice had saved consumers up to $218 million, largely because of solid deals negotiated through “municipal aggregation.”

But the Hinsdale debacle is worrisome. Although all suppliers should structure community deals that can withstand the types of market developments this winter, CUB wonders: Will any other suppliers follow Nordic’s move?

More than 600 communities or counties throughout Illinois have passed aggregation referenda allowing local leaders to negotiate power prices and switch all residents to a new supplier (all residents, that is, who don’t opt out of the deal). CUB today put out a news release to 81 other communities that face referenda this Tuesday, urging residents to read our fact sheet, which includes a list of questions to ask local leaders about any proposed contract with a supplier.

Now, unfortunately, we should add one more question to the mix: Under what circumstances can a supplier back out of a price, like Nordic wants to do in Hinsdale?