Peoples Gas parent to be acquired in $9.1 billion deal
Trending: Utilities are consolidating and getting bigger.
Peoples and North Shore, already part of a utility holding company headquartered in Chicago, are being bought by a Wisconsin-based utility holding company.
NICOR is owned by a utility holding company with its headquarters in Atlanta.
The acquisition of Peoples is following a trend of consolidation of regional utilities. The leading argument for consolidation is that redundant “overhead” costs can be consolidated. What consolidation usually means is that the local utility is no longer local. Remember that Peoples, NICOR, and ComEd are not competitive companies eking out an unknown profit. They have a monopoly (much like the game!) where they get to recover their set profit margin on expenses incurred in providing their essential service. That is to say, the more they spend on providing their service, the more profit they make which is why regulators approve their costs.
So consolidation means what? Typically, regionalized services by utilities means a loss of stable local jobs accompanied by higher costs. Remember it’s not a competitive industry. They get a regulated return for delivering energy. That’s why reducing costs does not translate to lower energy costs (note; if they spend less, they make less profit). Consolidating accounting, customer service, and management typically results in longer wait times, longer outage times, and higher returns to corporate shareholders.
The good news is that you do have competition for your energy services. Realgy Energy Services offer electric and natural gas service that is consistently below the utility. We compete for your business, by saving you money. And we do enjoy competing with bigger utilities!
Read the full Chicago Sun-Times article: “Wisconsin Energy buying Peoples Gas parent Integrys for $9.1 billion”.
Electric wholesale prices to rise by 9 times overall since end of Winter 2014
We ask “what is going on with electric prices?”
PJM is essentially the wholesale market for electricity in ComEd. They will request bids from generators (electric generator owners) every year for the next three years. PJM issued a press release announcing the results of their most recent auction.
The press release shares some interesting highlights such as “increased diversity” even though they acknowledge the trend to more gas-fired generation.
However, the bigger issue is that the cost of the bids increased dramatically over the next year, rising from $27.73 in 2014 to over $136 by the end of 2015. This nearly 900% increase will be passed thru to all retail customers. We have already seen about 50% of this increase.
This projected increase does NOT appear to be directly related to the winter “vortex” of 2014. However, given the timing of PJM’s bid (just after winter) and the trend to more gas-fired generation, some link shouldn’t be dismissed. Last winter reminded energy traders, power generators, utilities, and energy marketers of the extent of their reliance on certain pipelines. The demand on these pipelines is increasing (by both gas-fired electrical generation and through population growth). Therefore, as the wholesale price increases, we will be starting at a higher price next winter. If winter or summer weather spikes, we could see even greater pricing than last winter.
Realgy offers fixed pricing to reduce the effect of seasonal weather by offering a winter or summer fixed price. This allows our customers to avoid paying a premium for a fixed price when they don’t have to. Please call your Energy Broker or see our PriceWatchTM service at http://realgyenergyservices.com/request-for-service/pricewatchtm/
Read the full PJM press release, “PJM Capacity Market Secures New And Diverse Resources To Meet Future Electricity Demand”.
CUB warns of electricity market ‘rip-offs’
The Citizens Utility Board is an excellent watchdog organization. Their warnings and advice could not be more timely and on target.
Saving energy plays a significant role in saving the environment. When you use energy, you should know what it costs and that you are treated fairly.
There are two components to an energy agreement, price and terms. As the saying goes, what looks like a good deal is a good deal UNTIL it isn’t. This winter has certainly exposed the insider terms of energy marketers’ agreements and how cost recovery works for the utility.
In some cases, the energy suppliers provide “teaser rates” that are below utility rates but only last from 2-12 months. You are sure you will stay on top of it but time passes quickly and the next time you look at your bill, you could be paying two to three times the utility price. These “teaser rates” have a reset price that is purposely vague or that you cannot discover from any public information. Then when you want to cancel, it becomes a voice, logic, and perseverance test from the automated answering system.
As this year’s winter showed everyone that terms are important, a low rate is fine IF EVERYTHING is perfect, but that’s not the world we are in.
Realgy is proud of our price, our terms, and our customer service team. We know we offer tremendous value compared not only to the utility, but also to any other energy supplier in Illinois. In fact we put it in writing in our agreement; we call it ServiceMatchTM. It’s simple; we guarantee to beat or match any comparable proposal for your service.
Illinois is implementing real-time metering and municipalization so the complexity in energy purchases is built in. However, in our role as energy experts, Realgy offers energy service that delivers savings in an easily understandable manner as compared to the COMED or Ameren. Call our sales team today, and you’ll understand the difference.
Read the full Chicago Tribune article, “Watchdog warns of ‘rip-offs’ in electricity market”
COMED parent company to pay $6,800,000,000 for East Coast utility
As the late Harry Caray, iconic baseball announcer, might say, “Holy Cow!”.
Now we see that Exelon, the corporate holding company which owns the local utilities of Baltimore Gas & Electric and COMED, seeks ownership of the utilities around Washington, D.C. and Philadelphia. This would more than double the customers they serve in COMED.
Utility acquisitions that are not in relatively close proximity to their current customers would appear to offer no benefits to either Exelon or Pepco customers.
This acquisition will be closely scrutinized and I am sure will it will be opposed by several groups.
Exelon previous proposed the acquisition of a large utility group in New Jersey from which they ultimately withdrew due to opposing parties.
I look forward to hearing the rationale of how each local utility (BG&E, COMED, Pepco, and Atlantic City Electric) justifies the way each utilities’ customers are better served by having a larger corporation in charge of it.
Read the whole Crain’s Chicago Business Article “$6.8 billion Pepco buy makes Exelon an East Coast force”
COMPETITION WORKS; to the tune of $37 Billion
The State of Illinois is celebrating, not the ending of winter but the savings from energy deregulation.
Illinois consumers, including residential, commercial and industrials, saved a total of $37,000,000,000 as a result of opening electrical supply to competition.
Realgy Energy Service has been an alternative energy supplier in Ameren and COMED and our customer know the benefits of buying directly from Realgy.
I like the last line; “Competition works.” I guess if it didn’t we would all work for the Government, right comrade!
Read the whole Compete Coalition article, “With $37B in consumer Savings, Illinois Results Deemed ‘Triumph of Market-Based Public policy’”
Chicago electric bills to rise up to 18% in June
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”
In Response to “After six-year dispute, court orders $37 million ComEd refund”
Written by Michael Vrtis President of Realgy Energy Services in response to the Crain’s article After six-year dispute, court orders $37 million ComEd refund
So how do all the various entities work in overseeing a regulated utility or why does it take 6 years to refund overcharges?
This Crain’s article provides a great example, let’s look at the 3 steps:
STEP 1
The utility; ComEd has a monopoly to delivery electricity in its area and is overseen (regulated) by the Illinois Commerce Commission (ICC). ComEd wants to be paid more for providing service and goes to the ICC requesting an increase in fees from customers in exchange for providing better and more useful service.
The regulator; ICC approves a rate increase (and the improved service) for which ComEd begins charging customer
STEP 2
The Consumer Advocate; Citizens Utility Board (CUB) is an agency that seeks to ensure ComEd treats its customers (mainly residential) fairly. Remember ComEd is a monopoly and can only charge what the ICC (in some cases politicians) approve. The CUB sees that the ICC approval of the rate increase unfairly treated the consumer to the benefit of ComEd. So, CUB sues ComEd and wins.
The Court; orders the ICC to review the matter. Again, the court won’t get into the technical review (that’s why they sent it to the ICC for re-review).
STEP 3
This step is about appealing (delaying) the previous decisions….. in this case the ICC agrees with CUB and removes those funds from the rate base which means ComEd (having already collected them) has to return them. They don’t have to return them as they were received but by some form of distribution of the funds.
Of course, ComEd appeals to the appellate court (they review lower court decisions) and lost. The appellate court would have to overturn the ICC on technical issues to agree with ComEd.
So let’s see if the money is returned. This example illustrates that a regulated utility has many people who watch them and those who watch and act to hold all sides accountable really do serve the public interest.
How does this affect Realgy’s customers; they will receive a refund (depending on how ComEd disperses them) as this was a charge related to distribution of the wholesale supplied energy in part provided by Realgy.
Check out the Crain’s article: “After six-year dispute, court orders $37 million ComEd refund”
In Response to Chicago can’t beat ComEd price. So raise it?
Written by Michael Vrtis President of Realgy Energy Services in response to Chicago can’t beat ComEd price. So raise it?
Realgy DOES NOT support changing how the Illinois Power Agency buys power, so that our prices can be more competitive.
We already are:
- Realgy has been below ComEd monthly pricing since January 2012, Twenty-one straight months in a row!
- Our average commercial customer has saved $3,741.41
- Our average residential customer has saved $90.02
We compete in serving our customers, not just with lower priced energy but smarter buying strategies.
This price question is a result of municipal aggregation, where cities like Chicago want to be able to raise money by adding a surcharge onto the electric rate customers pay, and still show savings compared to the utility!
Municipalities select an energy marketer as their preferred vendor and require they add a surcharge to their cost which they pay to the city. The surcharge provides no value to the customer or the energy marketer.
Perhaps instead of looking to raise everyone’s price of power they should just get out of the aggregation business or look to actually add value for their surcharge.
Check out Crain’s article: “Chicago can’t beat ComEd price. So raise it?”
In response to “ComEd rates are set to surge”
Written by Michael Vrtis, President of Realgy Energy Services in response to the Crain’s article “ComEd rates are set to surge”
The headline is clear, the timing is a year away…so what to do?
Short-term power planning normally means a 10 year span because power infrastructure (such as pipelines, power plants, distribution lines, etc) have useful lives of 25 years.
So, while the talk about a year-to-year rate hike is not unique, it is certainly unnecessary.
This is the result of Illinois legislators giving ComEd approval for expenditures (which result in rate or cost increases) that the regulators (think of them as the technical advisors) can’t review, modify, or reject. The result is political involvement and rate shock.
Perhaps the 23% rate increase will provide benefit; that is usually how the regulators hold the utility accountable. However, when the politicians approved this increase, guess who will, in turn, hold the utility accountable? That’s right, not a soul.
What to do? Sign up with Realgy Energy Services. Realgy has delivered costs below ComEd for over 5 years. We will continue to provide a fixed price that will reduce this unnecessary rate shock.
Check out Realgy Energy Services ComEd rates for May 2013 and see how much you could be saving www.realgyenergyservices.com Or Call one of our Energy Brokers today 877-300-6747.
Read the whole Crain’s article: “ComEd rates are set to surge”
In response to “Quinn vetoes ComEd rate hike bill”
Written by Michael Vrtis, President of Realgy Energy Services in response to the Crain’s article “Quinn vetoes ComEd rate hike bill”
Governor Quinn is sending a political message that should not pass through more thoughtful consideration of legislators. ComEd has already received approval from the legislators to bypass the ICC in their review and approval of their rates. ComEd has politicized the rate setting process instead of relying on the experienced technical and financial input of regulators.
While they may be successful in the short term, eventually the regulators will have to review their rates and then the balance will likely be restored. Allowing politicians to approve utility plans is not good policy and is even worse for rate payers.
Check out the Crain’s article: “Quinn vetoes ComEd rate hike bill”