For the second time in less than a year Illinois consumers—first in Central and Southern Illinois and now in Northern Illinois—face significantly higher electric bills because of a flawed power-pricing system. And while electric customers will take the hit, big power generators like Exelon, NRG and Dynegy stand to earn windfall profits.
“Illinois’ electricity market is not working well for consumers,” CUB Executive Director David Kolata said in a statement.
On August 21, PJM Interconnection—the power grid operator for northern Illinois and 13 other states—announced the results of an electricity auction that will increase power prices in Northern Illinois three years from now. CUB estimates the price could jack up costs for typical homes by more than $80 from June 1, 2018 to May 31, 2019. The increase could be even higher for customers with electric heat. Alternative supplier customers won’t escape higher prices, either, although the impact will vary by company.
The increase is largely due to a change in rules in how electric “capacity” auctions are run by PJM. “Capacity costs” are what consumers pay to ensure power plants are able to deliver electricity on the highest-demand days. These costs show up in the “supply” portion of your electric bill.
This year’s auction was held under new “Capacity Performance” rules designed to spur power generators to provide electricity during extremely cold weather, such as the Polar Vortex in 2014. (PJM said 22 percent of generation was unavailable to serve customers on the coldest day of the year in 2014.)
Of course, keeping the lights on is important, but CUB has long argued that there are no guarantees that the extra money power generators receive will actually be used to make the system more reliable. One thing is for sure: Customers will be slapped with higher electric prices while generators are cashing their checks. (The Chicago Tribune cited industry experts who estimated that the higher capacity costs could bring ComEd-parent Exelon roughly $400 million in additional revenue over last year’s auction.)
The auction results come on the tail of a similar auction this past spring by the power grid operator in Central and Southern Illinois, MISO, that sparked a 30 percent increase in power prices in that region.
Given that Illinois has a surplus of power, these extreme prices are ridiculous. We need to figure out how to set prices more fairly.