If you live in Chicago, Illinois, you’ve probably noticed advertising and marketing campaigns offering to “switch” you to one of the new energy companies in town, lured by lower electric rates that could help you start saving money on your monthly electric bill.
Thanks to energy deregulation in Illinois, five alternative retail energy companies have entered the electricity supply market, each one competing with Commonwealth Edison Co., the deregulated utility — and each other — for residential and commercial customers. And more may be on the way.
Spark Energy, BlueStar Energy Solutions, Champion Energy and Direct Energy Services were the first four retail electric companies to enter ComEd’s Chicago market. Constellation NewEnergy followed not long after. Two more companies, Commerce Energy and FirstEnergy Solutions, have gotten clearance to sell electricity to Chicago homeowners, but have not yet entered the market.
While the retail energy companies may offer lower electric rates than ComEd, consumers have been slow to start buying less expensive electricity. Only 807 of ComEd’s roughly 3.4 million customers switched to a retail energy provider through September of last year, the most recent period for official numbers.
Recently, however, consumers have begun switching to retail energy companies in greater numbers. “Thousands of people have switched to Spark Energy since the latest figures were released back in September,” said Spark Energy Alternate Sales Director David Mirza. Although Mirza made it clear that the company’s numbers were unofficial, he said the flow of customers leaving ComEd for retail energy companies has increased dramatically over the past five months.
Retail Electric Companies Learn From Natural Gas Deregulation
One of the reasons for the slower than expected start among electric switchers could be the way that natural gas deregulation, which preceded electricity deregulation in the state by a few years, failed to initially deliver on promised savings, leaving consumers perhaps similarly skeptical of retail energy companies.
“Natural gas competition really is not working all that well for consumers,” said David Kolata, executive director of the Citizens Utility Board, the state’s top utility watchdog group. “The vast majority of the offers have been money losers for consumers.”
Although a lawsuit brought against one retail natural gas supplier by the Illinois Attorney General over misleading, high-pressure sales tactics may not have helped with consumer confidence, the Illinois Better Business Bureau has given high marks to the five retail energy companies selling electricity in the state, proof that the electric companies may have learned from the mistakes of their natural gas counterparts.
But that doesn’t mean consumers shouldn’t read the fine print, Kolata cautioned. “[The retail energy company’s] offers are below ComEd’s price, but that doesn’t mean they will be below ComEd’s price forever,” Kolata said.
ComEd Seeks Automatic Rate Hikes to Modernize Grid
If legislation backed by ComEd is approved by the legislature, customers who buy electricity from the utility will see rates go up an average of 2.2 percent a year over the next 10 years. The legislation, pushed by Rep. Kevin McCarthy, a Democrat from Orland Park, is intended to allow the utility to raise funds for a $2.6 billion modernization of its power grid over the next decade.
“What we’re trying to do with the legislation is open up a dialogue about Illinois’ energy infrastructure for the future,” said Anne Pramaggiore, ComEd president and chief operating officer, in an interview with the Chicago Sun-Times.
“We see the world changing. Our customers…are more dependent on the grid than they ever have been,” Pramaggiore said.
However, critics of ComEd’s plan, including Kolata, say the legislation is little more than an end run around the Illinois Commerce Commission, which is typically responsible for approving utility rate increases.
“Under the guise of saying they want to modernize the grid, which could be a good thing if done right, what they’re really proposing to do is gut the regulatory system that’s been in place about 100 years and replace it with one that’s got far less oversight of rates and lead to rate increases year after year,” Kolata said.
ComEd has an unrelated 5 percent rate increase request pending before the ICC that would raise revenue by about $396 million. If ComEd secures a rate increase through its legislation in the General Assembly, it will be in addition to the rate increase request currently before the ICC.
“Energy Companies Want ComEd's Customers,” NBC Chicago, March 7, 2011.
“Five Energy Companies Take on ComEd to Power Chicago Area,” Chicago Sun-Times, March 8, 2011.
“ComEd Seeks Rate Hike With Legislation,” Chicago Sun-Times, March 10, 2011.