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5 surprising things you should know about the June rate hike

As of June 1, ComEd’s electricity rate shot up 38 percent,  to about 7.596 cents per kilowatt-hour (kWh). And the prices offered by unregulated power suppliers competing against ComEd are going up too.

To paraphrase Dorothy: “Toto, I don’t think we’re in the same electricity market anymore.”

Whether you’re with ComEd or an alternative supplier, you might be surprised to learn these five things about the June 1 increase.

1) Why? The major reason for the increase is due to a jump in “capacity costs” embedded in the per kilowatt-hour energy charge we pay.

Suppliers charge these costs to us in order to pay power generators. The whole idea behind capacity costs is to make sure generators are able to produce enough power when demand is at its highest–the handful of extremely hot days when everyone is cranking up the AC and factories are humming. Think of capacity charges as a reservation system: We’re reserving power for when we need it most. These costs are determined by an auction three years ahead of when they actually take effect.

Capacity costs are up partly because we depend on older power plants, which produce more expensive electricity. Another key reason is that Exelon, the parent company of ComEd, has tied itself to a regional power grid that also serves East Coast states, where power is more expensive. CUB has long complained that the method of determining capacity costs is flawed to the benefit of generators and the detriment of consumers. For one, the generators need to be thinking more of how energy efficiency can help control demand.

2) Alternative suppliers aren’t immune. Alternative suppliers have to pay capacity costs, just like ComEd, so we’re seeing higher rates for those companies as well.

3) ComEd’s not profiting off the June rate hike. “Bull,” you may say, but it’s true. ComEd, under state law, cannot profit off the actual electricity supplied, which takes up a half to two-thirds of your monthly bill. Of course, the company does profit off the delivery portion of your bill—what you pay the utility to deliver the power to your home. In fact, we’re currently fighting ComEd over a $275 million delivery increase it wants January 1.

4) ComEd’s rate is 7.596 cents per kWh, but not really. 7.596 cents per kWh is ComEd’s “price to compare”—against which you judge alternative supplier offers. But there’s one fee/credit that the 7.596 cents per kWh does NOT reflect. It’s called the Purchased Electricity Adjustment (PEA). The PEA impacts ComEd’s supply price, but not the prices offered by alternative suppliers.

Remember, ComEd can’t profit off the supply rate. The PEA makes sure that in any given month, the company is never making more off customers than it actually spent for the electricity. It changes monthly and sometimes it’s a credit, sometimes it’s a charge. (Check out the historical “price to compare” along with the PEA.)

In June it’s a 0.5 cents per kWh credit. So the REAL ComEd price is about 7.1 cents per kWh, NOT 7.6 (at least for June). We won’t know what the PEA will be in July until a few weeks from now.

5) Customers in Central and Southern Illinois are seeing LOWER rates. That’s right. Rates for Ameren Illinois actually went down about 3-5 percent on June 1, to under 5 cents per kWh.  Ameren is connected to a Midwest power grid that figures capacity charges differently. It also doesn’t have the intense power demand issues that ComEd’s grid, connected to East Coast states, faces.

This week, CUB put out a consumer alert about the increase in June prices, pointing out that “energy efficiency is the most reliable way to take control of your power bills.” Visit CUBEnergySaver.com to design the perfect energy efficiency plan for your home.