Is Ill. on the cusp of a new era of electricity competition?

By Jeffrey Tomich | 07/15/2015 08:49 AM EDT

More than 3 million residential electric utility customers in Illinois have defected to alternative suppliers since the retail market opened to competition.

But for the first time since the residential market opened a little more than five years ago, there’s been movement in the other direction as customers in northern Illinois begin drifting back to incumbent ComEd. And on average, ComEd customers saved money compared with those taking service from alternative suppliers during the 12 months that ended May 31, according to a report from the Illinois Commerce Commission’s Office of Retail Market Development.

The report, produced annually to update the Legislature on the state of competition in the retail electricity market, estimates residential customers who took energy service from ComEd over the 12-month period saved about $73.4 million, or almost half a cent per kilowatt-hour, compared to those who buy energy from one of several dozen certified competitors.


The numbers reflect a significant but unsurprising change from 2013, when customers taking service from an alternative supplier saved more than $200 million. In fact, the convergence of ComEd’s default rates for electric service and rates offered by competitors significantly converged last year after the expiration of a long-term pre-recession electricity supply contract.

"This year was certainly a break from the last few years," said Torsten Clausen, executive director of the Office of Retail Market Development.

For now, the savings data is limited to ComEd’s service area in northern Illinois. Next year, though, the ICC report will also take a closer look at price in Ameren Illinois’ service territory, which covers central and southern Illinois.

Going forward, too, there’s expected to be less difference between the price offered by competitive suppliers and the price from utilities, said David Kolata, executive director of the Citizens Utility Board, a Chicago-based consumer advocate.

"The era of easy savings is over," he said. "If it’s just pure commodity competition, the Illinois Power Agency does a pretty good job."

Communities are returning to utilities

The Illinois Power Agency is a state agency created in 2007 to procure generation and serve as a buffer between utilities ComEd and Ameren and their generation-owning affiliates.

To help stimulate retail choice in the residential market, the same legislation that created the IPA enabled municipal governments to pool their electric load in an effort to help wrest lower prices.

To date, a majority of the residential consumers who take energy service from an alternative provider do so as part of municipal aggregation programs. But as of May 31, 121 of the 743 communities that passed ordinances allowing local governments to shop for cheaper electricity rates for residents have returned or will return to incumbent utilities, according to the ICC report.

Among them, notably, is the city of Chicago, which will return to ComEd as an energy supplier this fall after the expiration of a two-year agreement with Integrys, an energy marketer that was acquired last year by ComEd’s parent company, Exelon Corp.

As of yesterday, customers within ComEd’s service area in and around Chicago could choose from 86 different offers from electricity suppliers. Providers familiar names such as Dynegy Energy Services, Constellation Energy, an Exelon unit, NRG Home, AEP and Comcast.

Some offers include 100 percent green energy offset by renewable energy certificates. Others are sourced using only local wind resources. There are varying terms. Some rates are fixed and others are variable. Some offers have termination fees and others don’t.

More customers are shopping around

Another sign the residential market is changing: While Chicago and other municipalities in Illinois are returning to incumbent utilities, more individual households are shopping for electric offers on their own.

It’s a point in the 47-page report that also caught the attention of Kevin Wright, a former ICC member and head of the Illinois Competitive Energy Association, a trade association of competitive energy suppliers.

Wright believes the trend reflects a market where customers are becoming increasingly aware and comfortable shopping for electric service on their own, not solely relying on their local government to do it on their behalf.

"When you look at residential competition, it’s really been driven by the aggregation programs," he said. "But I’m optimistic for the opportunity for [alternative retail electric suppliers] to go after those customers in individual contracts."

Direct Energy, a member of the association that has contracts with nine communities in ComEd’s footprint, has made a policy shift in Illinois and other states with municipal aggregation to focus signing up customers directly, said Teresa Ringenbach, senior manager of government and regulatory affairs in the Midwest for Direct Energy.

In Illinois, that has meant rolling out offers that make use of the millions of smart meters being installed across Chicago and northern Illinois.

Direct Energy last year began offering its "free power days" service to customers in ComEd’s service area that already have smart meters. The offer allows customers free use of electricity Saturday or Sunday as a way to help manage energy costs by shifting high-use activities from other days of the week.

Under another Direct Energy offer, customers receive a Nest thermostat.

Ringenbach and others believe additional service offerings tailored to specific customer needs will be made available as smart meter deployment continues.

"I think that the market as a whole is going through a transition," she said.

Meters providing more control

That’s also the future envisioned by Kolata of the Citizen Utility Board, which has joined with the Environmental Defense Fund to push for technical, policy and legal help to enable service providers to be able to leverage the power of the smart meters being installed.

In years to come, price won’t distinguish the service provided by the utility from what’s offered by so-called alternative retail electric suppliers, he said. It will be energy efficiency, demand response, solar, energy storage and other behind-the-meter services that will help consumers better manage energy consumption.

They include a proposed "open data access framework" that would establish standards for customers to obtain smart-meter data in convenient formats either from the meter or online. The customer could also allow the data to be accessed by third parties including competitive electric suppliers (EnergyWire,Aug. 19, 2014).