Community Choice is called Municipal Electricity Aggregation (MEA) in Illinois. MEA became wildly popular from 2011 to 2013 because it offered very significant savings to customers. But when savings largely disappeared in 2014-15 many MEAs ceased operations. Nevertheless, Illinois still has hundreds of MEAs and a strong base of political support.
Municipal aggregation in the Midwest operates in a competitive retail environment. A functional separation between power generation and power delivery has existed since the 1990s. Municipalities or individual customers are able to sign contracts to buy power from licensed Alternative Retail Energy Suppliers (ARES). However, before the introduction of MEA, few residential customers took the trouble to switch to electricity from alternative suppliers
As in other Community Choice states, Illinois’ large utilities – ComEd and Ameren Illinois – continue to handle power transmission and distribution, line maintenance and customer billing. Because the retail market was already open, the utilities expressed no opposition to the introduction of municipal aggregation. ARES companies supported the introduction and growth of MEA because it reduced their customer acquisition costs.
In 2012-13 Illinois was the fastest growing community choice market in the nation. The growth was caused by MEAs initially having a pricing advantage of as much as 3 cents/kWh over the incumbent power suppliers. MEAs offered rates of about 5 cents/kWh at a time when ComEd was charging about 8 cents/kWh.
Capping this period of heady growth, Chicago voters approved a referendum in November, 2012 to launch an MEA, making it by far the largest US city to embrace community choice. More than 70% of residential and small commercial customers in ComEd’s service region were enrolled in MEA in late 2013.
By the middle of 2014 more than 720 Illinois communities had formed MEAs; however, in the second half of 2014 the price advantage that MEAs had enjoyed began to erode and, in some cases, became a price disadvantage. The two large investor-owned utilities were able to obtain cheaper electricity supplies and lower their rates. Consequently, approximately 100 MEAs (including Chicago in 2015) returned their customers to bundled service provided by Ameren Illinois and ComEd. (Doing this did not terminate the existence of an MEA. It essentially suspended the MEA so that it could be restarted if conditions changed, and no new referendum would be required to do so.)
By 2016 many MEA programs were once again able to sign contracts with suppliers that offered a slight price advantage (up to 1 cent/kWh) over utility prices to their customers. This stemmed the decline in the number of MEAs, but whether it will lead to a renewed expansion into new communities is an open question.
CURRENT AND EMERGING ISSUES
New “capacity charges” were added to the bills of ComEd customers in 2014 and 2015. At first these charges were flat, i.e., the same for each residential account, but in late 2015 they were tied to each customer’s peak demand (measured in kilowatts). This shift diminished the importance of the price of energy (measured in kilowatt-hours), which is the only variable that an MEA can influence. Demand-based charges also reduce the cost savings from energy efficiency programs because there is no way to guarantee that efficiency measures will impact peak demand. For example, if peak demand in summer occurs in early evening because of air conditioning usage, energy efficient lighting that is used mostly at night has no impact on a home’s peak demand.
In late 2016 MEA advocates feared that new distribution demand charges would be rolled out in 2017. If approved, these charges would have proved to be another challenge for MEAs and their customers. ComEd’s proposal was the Next Generation Energy Plan, and the Illinois Clean Jobs Coalition issued its own counter-proposal. Ultimately the legislature passed SB 2814 (2016) without anti-consumer, anti-solar proposals. The removal of demand charges and reinstatement of net metering happened after protests by consumer advocates and voters. The bill also increased the share of electricity that will come from renewable sources (the RPS) to 35% by 2030.
As shown in the graph below, participation in MEA seems to have stabilized at approximately 1.9 million customer accounts. This Excel file, which is updated monthly, contains the data used to create the graph. The graph includes customers of MEAs as well as accounts that contract directly with an alternative supplier, but there are few of the latter so the graph essentially is a picture of the rise, decline and stabilization of MEA in Illinois from June, 2010 to October, 2016.
Although rate savings have always been the primary impetus for MEA formation in Illinois, some municipalities have prioritized purchasing electricity generated by renewable resources, particularly wind energy. Other cities – perhaps as many of half of Illinois’ MEAs — purchase energy from coal, nuclear and combined cycle gas plants, but offset the associated greenhouse gas emissions by purchasing unbundled renewable energy certificates (RECs).
While municipal aggregation remains in force in hundreds of Illinois communities, expansion into new locations has slowed dramatically, but has not stopped. In November, 2016 seven communities held referenda to establish new MEAs. The referenda passed in Atwood, Bement, Sidell and DeWitt County. They failed in Carlinville, Harrisburg and Staunton.
PROCESS TO ESTABLISH AN MEA
Under Illinois law, communities must use this process to establish an “opt-out” MEA. (1) Adopt a resolution authorizing a local MEA referendum. (2) Hold the referendum. (3) If the referendum passes, adopt an ordinance establishing the MEA program. (4) Develop a plan of governance and hold two public hearings before adopting it. (5) Conduct a public bidding process for electricity suppliers. (6) Implement the program, including ample public education and opt-out notifications.
If a community wishes to establish an MEA on an “opt-in” basis (this is not common) it can do so by simply adopting an ordinance. No referendum is required.
ALTERNATIVE RETAIL ENERGY SUPPLIERS (ARES) SERVING ILLINOIS MEA (Source: Illinois Commerce Commission, Oct. 2016)
- Constellation Energy (an Exelon company)
- Direct Energy
- Dynegy Energy Services (see also Homefield Energy below)
- Eligo Energy
- FirstEnergy Solutions
- Homefield Energy (a Dynegy company)
- IDT Energy
- MC Squared Energy Services
- MidAmerican Energy
- Nordic Energy
- Illinois’ Renewable Portfolio Standard (RPS) calls for 11.5% of electricity generated in the 2017 “energy year” to come from renewable sources, 16% in 2020, 25% in 2025 and 35% in 2030.
- Illinois has more political jurisdictions participating in aggregation programs than all other states combined.
LEGISLATION (Partial List)
- Electric Service Customer Choice and Rate Relief Law of 1997 This law significantly restructured the Illinois electric industry and provided a transition to competitive retail markets. It allowed alternative retail electric suppliers (ARES) to compete against each other and the utility to service customers. Customer choice was phased-in starting in October, 1999 for commercial and industrial customers and in May, 2002 for residential customers. The Illinois Commerce Commission was charged to promote the development of an effectively competitive electricity market.
- Retail Electric Competition Act of 2006 laid the groundwork for a competitive retail electricity market for residential and small commercial customers.
- SB 1299 (2007) created Public Act 95-0700 which required ComEd and Ameren to offer consolidate billing to MEAs and removed certain other operational barriers related to billing and receivables.
- HB 0722 (2009) created Public Act 96-0176 which amended the Illinois Power Agency Act to provide for aggregation of electrical load by municipalities and counties beginning on January 1, 2010.
- SB 1396 (2011) created Public Act 097-0222 to set up a consumer information program to support residents in the process of deciding if they want to participate in aggregation programs.
- HB 3182 (2011) created Public Act 097-0338 which amended Public Act 96-0176 to add a requirement that the account numbers be provided by the utility to the municipal aggregator, along with the customers’ names and addresses.