Consultant Looking to Plug In To Elmhurst's Aggregation Bid
Referendum on seeking alternate power suppliers is March 20.
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Elmhurst will likely approve a contract with a consultant to help residents purchase power from alternate sources if an upcoming referendum on electricity aggregation is approved. The city's Finance, Council Affairs and Administrative Services Committee Monday recommended hiring the Northern Illinois Municipal Electric Cooperative (NIMEC) to help educate residents and solicit bids from power suppliers.
Residents will decide via referendum if they want the city to bundle home and small businesses together and seek bids for electricity on the open market. Other suburbs, including Oak Park, have recently voted to buy electricity from suppliers other than ComEd.
NIMEC has worked with many of the local towns that have turned to providers other than ComEd for electricity, City Manager Jim Grabowski said. The company not only brings together municipalities and gathers bids on their behalf but also aids in creating governance and operations structures for these new contracts. For example, if the referendum is approved, Elmhurst will have to decide to what extent it wants to require companies use renewable resources in providing power.
If residents approve going forward with electricity aggregation, any household or small business that does not want to participate can opt out.
NIMEC's estimated charge of $.00002 per kilowatt hour, or approximately $34,500 annually, will be built into its bid to the power companies. This charge also includes help with the referendum, including the creation of a brochure and a water bill insert prior to the vote. If the referendum is not approved, the city will not pay anything to NIMEC.
Committee members cautioned that the city can only provide the facts to residents but cannot advocate for the referendum's passage. As part of its efforts to offer information, the committee also asked staff to make a Frequently Asked Questions page on electricity aggregation prominent on the city's website. This would provide clear answers to many questions residents have, including how much the average household can save by changing power providers. According to NIMEC's website, eight communities that saw referendum approvals in 2011 were able to save 20 percent to 25 percent per year.
The Elmhurst League of Women Voters and the Cool Cities Coalition have also pledged to help the city educate voters before the referendum.
Grabowski told the committee that if the referendum is approved and a new provider is found for residents who chose to take part in the program, it is likely that ComEd will eventually lower its rates as well, which means that these consumers could ultimately end up returning to the utility.
The full City Council will consider NIMEC's contract next Monday.
Dan
7:53 am on Tuesday, January 10, 2012
Isn't it kind of odd that we would pay a consultant to "educate" us to use thier services that they in turn will profit from. How impartial will the information they send out with our water bills be if they are the very ones that will benefit from the referendum passing? Isn't this a conflict of interest similar to the recent COD referendum where it was ruled by county election board that they acted improperly since it was being pushed and we were educated by some of the same folks that would benefit if it passed?
The main issue with electricity in Elmhurst is reliability. Considering that Com Ed will still handle the transmission end even if a significant number of us switch to another provider couldn't that impact the service that Com Ed provides us with after storms? If one town buys 100 percent of the power from Com Ed and another only 75 percent which town will be viewed as a more loyal and profitable customer and be first in line to see their power restored? Can I include some of my concerns in the education material that is being sent out or is that reserved only for the payed consultants that will profit if the referendum passes?
Jim Court
8:00 am on Tuesday, January 10, 2012
Dan,
What if every town opted out for another provider? ComEd would face lack of capital to maintain the power grid. I agree that ComEd needs more oversight and accountability but I wonder if turning to other providers will prove counterproductive.
John Lussow
9:09 pm on Tuesday, January 10, 2012
ComEd is a regulated utility. They do not make money on the supply end of the business. Their money is made on the distribution side. ComEd's supply rates are set by the ICC. Third party providers are not regulated so they can charge different rates for the commodity.
Frank Canzolino
8:57 am on Tuesday, January 10, 2012
I think we will find that when we look at the out-years, the difference will be next to nothing as far as costs. There will only be short term savings. AND I hate opt-out, it is really a method to provide a false-choice to people, the choice is actually being made by the proponents of the aggregation. It's like getting hit with a hammer unless you tell someone not to. Shouldn't have to tell them in the first place.
Doremus Jessup
1:30 pm on Tuesday, January 10, 2012
Yes , saving people money unless they opt out is the same thing as hitting someone with a hammer, it's the exact same thing.
Frank Canzolino
1:41 pm on Tuesday, January 10, 2012
May I assume you don't mind being email SPAMed? Opt-out is a false "choice" since it is proven that people will not take an action. The opt-out is nothing more than cover for the elected officials to say they are giving people a choice. A choice requires one to choose something, here the proposal requires positive action for someone to NOT do something.
Long term studies of these aggregation schemes show that over the long term, there are less benefits than initially evident. Plus there is a very real risk aggregation may cause an increase in prices. Aggregators will low-ball the first couple of years costs, then prices increase rapidly. Additionally, aggregators only contract to supply a defined amount of power, anything above is bought on the spot market, and those high costs passed to the consumer. You no longer have rate control that restricts ComEd pricing. Too much risk for very little long-term reward.
Frank Canzolino
1:44 pm on Tuesday, January 10, 2012
P.S. I am no ComEd fan, and I think they have been negligent upgrading their infrastructure. They need their feet held to the fire on existing distribution networks. SmartGrid has little to do with increased reliability, and I smell another opt-out program coming where we must take SmartGrid or pay higher costs, like in Naperville.
John Lussow
9:13 pm on Tuesday, January 10, 2012
There will be no money saved by the consumer in the long run. It might look competitive for a months or so but by June ComEd's supply price will remove any of the headroom that the third parties have. Opt-out to actually save money. That or switch your house to ComEd's hourly rate.
John Lussow
9:21 pm on Tuesday, January 10, 2012
Frank, I opt out of these on a weekly basis. Lots of towns are aggregating now because of the misleading marketing used by these companies. My job puts me in charge of 581 accounts in 11 counties. I have a lot of experience with third party suppliers. I will opt out of this deal if there is any cost to switch during the contract.
Doremus Jessup
1:52 pm on Tuesday, January 10, 2012
When you mention a study you should link it, or else you lose credibility. I am for the opt out provision because it allows a better position at the bargaining table when it comes to negotiating a better rate.This aggregation is a long process and if you don't like it opt out. Personally, I like spending less money on electricity if you like spending more I would not be surprised because you also seem proud to have voted for Peter Roskam.
Frank Canzolino
2:04 pm on Tuesday, January 10, 2012
This is a well known phenomenon in Behavioral Economics. I'll give you a running start with this short description:
http://www.lyris.com/integrated-marketing/638-Behavioral-Economics-Opt-out-versus-Opt-in
Doremus Jessup
2:15 pm on Tuesday, January 10, 2012
Interesting link but I missed the part where I would not save that much money on my electricity bill.
Frank Canzolino
3:22 pm on Tuesday, January 10, 2012
http://blog.saveonenergy.com/2011/10/municipal-aggregation-programs-do-no-produce-lowest-rates-for-illinois-electric-customers/
Doremus Jessup
3:47 pm on Tuesday, January 10, 2012
Interesting link Frank.
Some valid points but I don't buy my electricity at different prices at different times of day. I can see why a large user might want to negotiate their own rate based on that type of consumption. I also would consider the author of that link and I surmise that her bread and butter is predicated on whether or not consumers are able to switch back and forth and having whole communities aggregate would hurt her business due to the length of contracts. If opt out saves me money on my bill and the city on theirs then it will save me money in taxes as well. I call that a win win. If you buy your electricity by hourly rates or are a large consumer you need to do the math.
John Lussow
9:27 pm on Tuesday, January 10, 2012
You should use the hourly rate. The switchover is free (new recording meter required) and your total cost will be much lower, especially if you actually wait until later the evening to do stuff like laundry and run the dishwasher. There are occasionally times that you will actually make money on every kWh used. You can even save more if you allow ComEd to cycle your AC during peak times. They can cycle the AC off for no more then 20 minutes and they take between $10 and $20 off your monthly bill for the option to do that. I have spoken to people on the hourly rate and none have had their AC cycled but they all see the discount.
John Lussow
9:08 pm on Tuesday, January 10, 2012
This is really not a good idea unless there is no cost to drop out after a few months. The lifespan of the third party suppliers is just about over. In or about June, there will be no more headroom between supply costs to third party companies. That is the main reason they are marketing so strong right now. They want two or three year contracts when a majority of that time there will be no advantage having a third party supplier.
Paying a consultant to find the right deal is absolutely ridiculous. All companies servicing this area and their rates are listed on the ICC site. How hard is it to meet with 4 or 5 companies? Pay me $20,000 and I'll take care of it in a few hours.
First off, people just opt out. It will not save you money in the long run. If you really want to save money, switch to ComEd's hourly rate. It will protect you from the City forcing this on you and no third party can come anywhere close to matching the hourly rate. Just ask them.
Dan
11:12 pm on Tuesday, January 10, 2012
Is NIMEC the only party that will collect a fee on the electricity purchased from the providers other then Com Ed or does the city also receive a commision? I was at one meeting where a resident suggested the library could save money by turning off more lights at night. The response was that the library doesn't pay for electricity so it didn't really make a difference. Does any one know if this is true and if the cost of electricity used by the library / city is passed on to us through higher electric bills?
John Lussow
6:48 am on Wednesday, January 11, 2012
Also keep in mind that there is a possibility that aggregation will mean two bills, one to the supplier and the other to ComEd for transmission. Some plans consolidate the bills but there are still two entities collecting money. The window for any real difference in supply cost is closing just like the natural gas window just closed.
John Lussow
6:42 am on Wednesday, January 11, 2012
Generally the cities do not pay for electricity. It is part of the franchise agreement between ComEd and the individual municipalities. The customers do not get billed for the city's usage but ComEd retains the distribution rights and that is where they make the money. Naperville, Rochelle and a few other towns in northern Illinois actually own their own systems so ComEd technically does not supply or distribute energy in those towns.