An Illinois municipality has passed a referendum that allows the village to bid for cheaper electricity without needing the consent of residents.
The Village of Lincolnwood in northeastern Illinois put the Electrical Aggregation Referendum on its April 5 ballot after Village trustees voted unanimously to request permission from residents to shop the state’s retail electric providers, and solicit competitive bids on residents’ behalf for the lowest possible electricity rates.
Even though Illinois approved electricity deregulation in 1996, only large commercial and industrial customers have been able to benefit from switching to a more competitive electric provider until recently.
Beginning this year, however, residential and small business customers will be able to choose to buy their electricity from competing retail electric providers. These customers were previously forced to buy their electricity from one of the state’s two public utilities, Ameren Illinois Utilities (Ameren) or Commercial Edison Co. (ComEd).
“Since the state deregulated the electric market, nearly all of the change has been limited to the commercial market,” David Hover, executive director of the Northern Illinois Municipal Electric Cooperative (NIMEC), an association of 140 municipal and government entities that have banded together in order to reduce electricity prices.
Hover added that the change has been dramatic, saying that “76 percent of the commercial market has moved from ComEd to take advantage of lower cost suppliers.”
Lowest Rate From Electric Provider Could Win Bid
Although the Village already saves 7 percent on street lighting by working with NIMEC, the municipality now has the legal authority to solicit bids from other energy companies without the consent of residents.
Now that the referendum has passed, Lincolnwood plans to work with NIMEC again to find cheaper electric rates from alternative electric suppliers. At no cost to its members, the cooperative aggregates its members’ electricity load and presents it to competing electric suppliers for bid. In exchange, the electric suppliers pay an origination fee to NIMEC for performing all the legwork.
Once NIMEC receives bids for the village’s residential and small business customers, the village plans to hold two public hearings in May to discuss the bids. The rates will be compared to those offered by ComEd and the village will enter into a contract with an alternative electric provider only if that provider’s rates are lower.
“It may not prove to be an enormous savings, but a savings nonetheless. If it's only one-and-a-half percent, we might not switch, but it doesn't cost anything to switch suppliers,” said Lincolnwood Mayor Jerry Turry.
If one or more of the bids is lower than the current rate, then the village would sign a fixed-rate agreement for one year with the “lowest, responsible supplier.” If the bids are all higher than the current rate, then the village would reject all bids and continue to buy its electricity from ComEd.
Deregulation is Confusing for Consumers and Communities
The process works well for consumers, Hover said, because “most residents are not sufficiently informed about deregulation or the various [electricity] supplier options to make an informed choice.”
Any residential or small business customers who wanted to opt out of the new contract would be allowed to do so. Those customers would continue to get their electricity from ComEd at the higher rate if Lincolnwood switches to another electric provider.
So far, only Fulton, a city in Whiteside County in northwest Illinois, has passed a referendum similar to the one Lincolnwood approved. Other nearby municipalities, including Glenview and Northbrook, aren’t participating in switching during the first year of eligibility in order to identify any drawbacks, according to Ashley Engelmann, Lincolnwood’s public works management analyst.
Other communities that filed similar referendums include Oak Park, Crest Hill, Elburn, Fox River Grove, North Chicago, Wood Dale, Mount Morris, Erie and Polo.
“Electricity Referendum OK'd for Spring Election,” Lincolnwood Review, Jan. 7, 2011.
Lincolnwood Village News website, “Electrical Aggregation Referendum Information.”