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CUB review: Many community power deals no longer money savers

There was a time when municipal aggregation–electricity deals that local leaders negotiate for residents of a community–secured savings for consumers, but a new CUB review has found that most deals are no longer beating the utility rate.

As of July 31, just 78 of the 555 total active municipal aggregation deals in Illinois offer a rate lower than the utility — ComEd or Ameren Illinois, according to CUB’s analysis of the Illinois Commerce Commission list of community deals. The good news is that consumers who want to get out of community power deals can do so easily and without cost.

Illinois law allows municipalities and counties to purchase electricity on behalf of residential and small-business utility customers. It’s called a community power deal or municipal aggregation.

You may not even realize you’re signed up for an electricity deal negotiated by your local elected officials. But the latest numbers show why you should get all the facts to determine if a community’s deal is right for you.

Municipal aggregation works like you’re buying in bulk. You know the drill: Instead of buying eight rolls of toilet paper at Kroger for $7.99, a lot of people go to Costco to buy 30 rolls for $19.99. Usually, you get a better price per unit when purchasing a larger quantity.

It’s the same basic concept for community power deals: Local leaders use the collective bargaining power of all the households in your town to negotiate with an alternative electricity supplier with the goal of securing a lower or at least reasonable power price for everyone, compared with the rate of the utility.

Community leaders can only move forward with a municipal aggregation program after local residents approve of it through a referendum. Once they do, and local leaders negotiate a deal, most, if not all, customers are opted into a community power deal. However, you can opt out anytime for free.

Because ComEd and Ameren were once locked in higher priced contracts, community power deals offered easy savings for consumers. However the last of those contracts expired in 2013. The way the market has been for several years, communities that enter into a municipal aggregation deal don’t always end up with lower rates.

Of the 555 municipal aggregation deals, only 14 percent matched or beat the supply rate charged by ComEd or Ameren Illinois this summer. (The utility rates change on Oct. 1.) CUB broke those numbers down by utility.

55 of the 217 active deals in ComEd territory have a better rate than the utility, according to ICC data. Forty of these deals promise an exact match to ComEd’s rate.

In ComEd territory, the average municipal aggregation customer this summer paid 6.67 cents per kilowatt-hour (kWh)  — compared to ComEd’s rate of about 6.47 cents through September. Assuming a customer used about 900 kWh per month over the summer season (June through September)  an aggregation customer would pay about $7 more over the summer for supply than a traditional ComEd customer.

That’s not an absurd price difference, especially if your municipal aggregation deal — as many do — is a green offer that typically charge higher rates.

If you are interested in a green energy plan, check to see if you’re signed up for one already through your community. While we hear of a lot of frustrated customers who pay way more than they should on a green deal that was pitched to them individually, we’ve seen green offers negotiated by communities that are more reasonably priced. Just be aware of what exactly a green plan is (read our fact sheet) and what you’re paying.

Of course, nobody should feel pressure to sign up for a green energy offer. There are countless ways to be environmentally conscious that are great for the planet without signing up with an alternative supplier: solar panels on your home, Illinois’ new community solar program, signing up for demand response programs, and practicing energy efficiency.

While alternative supplier customers in ComEd territory may overpay by just a few dollars, CUB’s review of community power deals in Ameren Illinois territory shows a more stark contrast.

Ameren territory is home to 338 active aggregation deals — and as of July 31, only 6 percent of them offered a rate that was the same or cheaper than Ameren’s rate. The deals have an average rate of 5.43 cents per kWh. (Currently, Ameren’s rate is 4.396 cents).

Using 900 kWh per month over the summer, an aggregation customer would pay $37 more than a traditional Ameren customer. Over a year, a municipal aggregation customer could be out about $100.

Remember, the numbers used above are averages. Some municipal aggregation deals can save you money. On the flip side, you can also lose money. (In Carbondale, for example, aggregation customers have a renewable energy plan that charges about two cents more per kWh than the utility rate — that could cost hundreds of dollars extra over a year. The City admits on its website that Ameren Illinois’ supply rate is lower.)

While municipal aggregation cannot guarantee savings, it has been a bright spot in the Illinois electric market compared to the numerous bad deals that are peddled to individual customers door-to-door, over the phone or via mail and have no connection to community power offers.

CUB has been generally pleased with how towns have communicated to their residents about aggregation — even going so far as to tell people when a power deal is no longer a good one. Take this mayor, for example, who went on local TV last year to tell his constituents to switch back to Ameren:  “This year, all the other municipalities are asking their citizens to opt out also and go back with Ameren,” the mayor said.

Wondering if your community offers a power deal? Check out this list provided by the ICC. If your community is offering a deal, make sure you know what you are signed up for. Read CUB’s Guide to Municipal Aggregation and review the checklist to ensure you’re satisfied with the offer.

And if you want to switch back to your utility, you can do so for free, by calling the alternative supplier listed on the supply section of your bills.