How Electricity Deregulation is Working to Free Illinois Electric Customers

ComEd electricity deregulation

Illinois electricity customers who get their electricity delivered by Commonwealth Edison Co. (ComEd) or Ameren Illinois Utilities (Ameren), the state’s two largest public utilities, reside in deregulated areas. While those residents can’t choose who delivers electricity to their homes, they can choose to buy their electricity from either the utility or an alternative retail electricity supplier (ARES). However, a little-known provision in Illinois law could be activated that would result in every resident and business in a deregulated area choosing an ARES to supply their electricity while the utilities would focus on simply delivering the electricity through their power lines and related infrastructure.

And that’s probably a good thing for Illinois electric customers. Here’s why.

Deregulation Has Resulted in Lower Rates for Electricity Customers

The Illinois electricity market was deregulated in 1997. Since then, commercial and industrial electricity customers have benefitted from buying electricity from ARES, which, as it turns out, are more nimble when it comes to procuring power than the Illinois Power Agency (IPA). While the IPA is tasked with buying electricity for ComEd and Ameren customers once a year at auction, the ARES are able to buy power from wholesalers continuously. As a result, the ARES have been able to offer lower prices than the utilities and business customers have pocketed significant savings. Now, more than 75 percent of Illinois businesses buy their electricity from an ARES.

Since 2007, residential electricity customers have also been able to buy their power from ARES. Now, as of December 2011, more than 261,000 residential customers have switched, including over 225,000 from ComEd. And that number is growing rapidly. ComEd alone has seen its number of switchers grow more than ten-fold since May.

If the number of switchers keeps rising, a provision of the IPA Act could be triggered that could result in additional benefits for electric customers. The provision states that if, anytime after July 1, 2012, more than one-third of a utility’s residential customer base is buying its power from an ARES, and there are at least three ARES competing in the utility’s service territory, the utility can petition the Illinois Commerce Commission to declare the market “competitive.”

If the Commission agrees, then the utility is allowed to essentially stop buying and selling electricity and concentrate fully on doing what it does best: delivering electricity to customers. Customers still buying their electricity from the utility at that point would be required to choose which ARES to buy their electricity from, and the utility would deliver that electricity to the customer’s home or business just as they always have.

Sources

Chamber Dispatch, “Imagine ComEd Buys No Electricity … It’s Easy if You Try.”

Illinois Commerce Commission, “Electric Switching Statistics: 2011 Filings,” published Jan. 25, 2012.

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