A new survey analyzing the deregulated electricity market in Illinois is drawing some negative conclusions, while acknowledging impressive savings consumers are realizing because of voter approval of electric aggregation referendums across the state.
The Citizens Utility Board, a statewide consumer watchdog group, has come up with a catalog of problems, including whether the savings being achieved today will stand the test of time, questionable sales pitches to consumers and a general lack of product innovation.
The Retail Energy Supply Association, an industry group for non-utility power suppliers, responded by saying its members followed strict guidelines for “good marketing practices” and that it welcomed efforts to rein in “any bad actors” who give the power industry a bad name.
The association also highlighted the savings being enjoyed by customers, estimated statewide from $92 million to more than $200 million in 2012. CUB ranked the level of those savings — as worth an “A-” in its survey. It said the savings have been especially impressive in towns that opted for municipal aggregation, allowing residents to be marketed as a block to competitive energy companies.
Overall, those customers have averaged a rate of 4.08 cents per kilowatt hour in the service territory of Ameren Illinois, compared to the default power cost offered by the utility of about 5.4 cents per kilowatt hour.
The lower rate is about what Normal residents are being charged under the town’s 17-month contract with Homefield, a Collinsville company that is owned by Ameren Corp. but separate from Ameren Illinois. The rate reflects a 27 percent savings on the typical Ameren Illinois rate. Besides Normal, several other area towns and counties have approved electric aggregation programs.
Voters in Bloomington, unincorporated McLean County and most of DeWitt County will vote on aggregation on April 9. In Normal, only about 5 percent of eligible residents have opted out of the program.
Making the switch
Since 2010, 1.7 million Illinois consumers have fled traditional utility service, with most switching last year when the number jumped 562 percent — a result CUB said was “unmatched in the nation.” Much of the 2012 increase was fueled by the more than 460 communities voting for municipal aggregation programs.
But the power landscape is set to change again.
CUB said long-term contracts that have made utility rates higher compared to non-utility suppliers are due to end June 1, prompting an expected drop in prices. CUB pointed out, however, that not all consumers are likely to benefit, particularly those who signed their own private deals with alternative power suppliers.
“Because of the expected drop in utility prices, CUB is concerned that many offers it is tracking charge ‘termination fees’ of up to $175 if customers want to exit a contract early,” it said in a statement. CUB gave consumer protections in the deregulated market a “C” rating overall.
It also warned families to be on guard because non-utility power companies, chasing a dwindling pool of potential customers, could be tempted to step up the use of questionable tactics to win new accounts.
“Illinois consumers should be on alert,” said David Kolata, CUB’s executive director. “Conditions could be ripe for rip-offs.”
CUB reserved its lowest grade — “D-” — for the failure to innovate among the non-utility companies. Given its belief that utility prices are set to fall, CUB said a more sustainable competitive model would focus on promoting energy efficient and money-saving technologies, along with alternative pricing models that take advantage of fluctuating power rates.
The Retail Energy Supply Association said innovations are in the works, but they require certain basic infrastructure to be in place first, such as “smart” electricity meters that open up more services to customers, such as half-off and free power days.
“As the Illinois market matures and the installation of smart meters increases, RESA expects customers to benefit not just from lower prices, but from competition-driven product innovation that will make a wide array of value-added products and services available to customers,” said Roy Boston, Illinois state chairman of the Retail Energy Supply Association.