Municipalization will not lower prices for consumers.

We have posted numerous articles about how municipalities are offering their residents electricity or natural gas collectively to energy marketers. The idea is that “aggregation” of the residents will provide the marketer the ability to deliver a lower price. If that were the case, no one could beat the utility because the question is who would be a bigger aggregator than a utility? The utility AGGREGATES everyone in the state. Yet, Realgy beats ComEd and Ameren consistently. So why can’t municipalities come in lower?

The difference is cost of service and overhead.

Municipalities require energy marketers to deliver savings compared to the utility, take on billing and collections, and pay the municipality a portion of the margin. The simple fact remains; the cost municipalities want to collect makes them higher than the utility.

So Chicago’s latest deal is a fixed 5.3 cents (however, the ComEd rate hasn’t been posted yet) and the terms won’t include the cost during the highest-demand periods of the year nor the cost of transporting the juice over high-voltage lines from the power plants to ComEd’s local distribution grid. These costs are variable and will add considerably to the fixed price.

The potential upside is $34 per household per year. Homeowners will be looking closely at this offer.

Energy purchasers will start to focus not just on the price but also on the terms. When they do, they will move to be more transparent.

Realgy has a history of offering its MangedPriceTM (which includes variable and fixed prices) that beat ComEd with all costs included.

 

Find the whole Crain’s Chicago Business article “Chicago electric bills to rise up to 18% in June under new Integrys deal”