Power 101: What You Need to Know Before Switching Your Electricity Supplier
Aug 24, 2012 10:59AM
● By Linda Sechrist
During the last few months, Chicago-area homeowners and renters have been receiving advertisements from electric power providers offering potentially lower electric bills and even “green power” if they switch from local supplier Commonwealth Edison (ComEd). Radio and television commercials for these retail electric suppliers tout amazing cost savings and contract-free agreements.
The information issued by these competing providers can be confusing, so it’s helpful for consumers to understand deregulation and explore several questions before making a decision. Should a homeowner switch power suppliers? What are the advantages? Can energy choices benefit the environment? And, why is green power so important?
The Need for Eco-Friendly Energy
Renewable resources such as wind, solar thermal, photovoltaics, geothermal and hydropower are all considered renewable energy, or green power. Fossil fuels are not—but many scientists agree that our over-reliance on them has led to worrisome global warming. In a recent Washington Post article, “Climate Change is Here—and Worse than We Thought,” NASA scientist and prominent climatologist James E. Hansen wrote that his 1988 picture of the grim consequences of steadily rising temperatures, driven by mankind’s use of fossil fuels, were too optimistic. He noted that research and analysis published in a new peer-reviewed study by the National Academy of Sciences shows that there is no explanation for the growing trend in worldwide weather extremes, other than climate change.
Leading Big Ten university climate scientists agree with Hansen, who explains that recent costly, severe weather events—such as the 2003 heat wave in Europe that killed more than 50,000 people and the 2011 Texas drought that caused more than $5 billion in damage—demonstrate the pressing need for clean energy.
Illinois Charts a Greener Course
The Big Ten and Hansen believe that steps in the right direction are being taken by the Illinois Renewable Portfolio Standards (RPS) enacted in 2007. These standards require the Illinois Power Agency, which purchases power on behalf of ComEd and Ameren Illinois (available outside the Chicago area), to obtain at least 7 percent of customers’ power demand from renewable resources by 2013. This amount increases by 1 to 1.5 percent annually until it reaches 25 percent in 2025.
To comply with this law, the state purchases Renewable Energy Certificates (RECs)—the “currency” of renewable electricity and green power markets. RECs are tradable, non-tangible energy commodities that represent proof that megawatt-hours of electricity were generated from a renewable energy resource, such as solar or wind. The RECs purchased by Illinois to green its power grid must be generated by resources located in Illinois or within the adjoining states of Wisconsin, Indiana, Iowa, Kentucky, Michigan and Missouri.
Also helping to mitigate climate change is the state’s Energy Efficiency Portfolio Standard, adopted as legislation in 2007, which aims to reduce energy use by 2 percent by 2015.
The Role of Deregulation
Achieving these standards and saving consumers money on their electric bill became easier in 2010, thanks to deregulation and an Illinois Commerce Commission (ICC) decision that enabled electric suppliers to bill customers through ComEd. As power suppliers began competing for business, local governments started forming consortiums that gave them the option of exercising bulk purchasing power.
Section I-92 of the Illinois Power Agency (IPA) Act allows for the aggregation—or combining—of electric loads by municipalities and counties. This helps consumers save money by providing a variety of electric suppliers, many of whom offer renewable green power options that exceed the 7 percent minimum standard.
Deregulation also gives Illinois consumers that don’t live in aggregated communities the ability to switch their power supplier independently. More than 586,000 former Ameren Illinois and ComEd residential customers have done just that, according to PlugInIllinois.org, the official electric choice website of the ICC.
Fortunately, switching to a different power company doesn’t mean a loss of customer service. ComEd continues to manage the delivery of electricity by maintaining the wires, poles and meters. It provides emergency service and restoration of service if a power outage occurs and also handles billing and questions about residential service.
The Renewable Energy Grid
Alternative power suppliers that provide green energy plans commit to buying RECs from a company that produces clean energy, such as wind. This ensures that they will deliver an amount of renewable energy into the electricity grid that is equal to the amount a customer consumes, but doesn’t mean they will deliver green power to that specific customer. The power can come from a variety of renewable sources, explains Valerie Aloisio, area director for North American Power, a retail electric supplier offering energy choices that include American Wind. She compares the grid, into which energy is pumped, to a swimming pool, where all the electricity produced from coal, nuclear, wind, solar and geothermal mixes together.
For every one megawatt-hour of electricity produced by a renewable energy generator, such as a wind turbine or a solar panel, one REC is created to quantify the positive environmental attributes of that energy. For example, when a wind farm adds one megawatt-hour (MWh) of electricity to the power grid, a buyer can purchase both the electricity generated and a REC. If the buyer chooses to purchase only the electricity, the wind farm sells the REC to another buyer at market value.
The Citizens Utility Board (CUB), a nonprofit, nonpartisan organization that represents the interests of utility customers in Illinois, explains that a state, aggregate, resident or business that purchases and claims a REC is ensuring that even if the power they consume isn’t derived from a renewable resource, sustainable energy is being added somewhere on the electric grid. CUB also praises Illinois’ Renewable Portfolio Standards as an effective way to make the electricity system cleaner and more stable.
These are important points for consumers to remember when seeking to green their power consumption, because renewable energy currently costs more. Although most renewable resources are free, the younger and smaller technologies used to convert them to electricity are not. Expanding renewable energy production and manufacturing in the U.S. requires significant capital investment incentives.
Differing Mindsets for Chicago’s Suburbs
A philosophical difference between saving money and going green seems to be emerging among Chicago suburbs. Many are forming aggregate groups and securing lower electric rates as well as options for their small businesses and residents, who can decide independently to select 25, 50, 75 or 100 percent renewable energy even if their board of trustees or city council members only vote to implement the 7 percent minimum standard.
The impact of differing mindsets—selecting the cheapest electricity possible or paying slightly higher rates for a more eco-friendly choice—recently became apparent in the villages of Wilmette and Kenilworth, whose trustees formed the Lakeshore Power Alliance with MC2 Energy Services, LLC, under an electrical aggregation program. While Kenilworth voted 5 to 1 in favor of securing 100 percent renewable electricity through RECs, trustees in Wilmette voted 6 to 1 in favor of a conventional mix of fossil fuel and nuclear energy that included the state’s required 7 percent minimum of renewable resources.
Margaret Martin-Heaton, publicity coordinator for the grassroots environmental organization Go Green Wilmette, noted the organization’s disappointment in Wilmette trustees, but adds, “Fortunately, we do have an option that allows Wilmette residents to contact MC2 if they want to choose 100 percent renewable energy under the program.”
Highland Park City Council Member Steve Mandel, who drives an electric car and charges his battery at midnight, was disappointed in the outcome of the council’s 5 to 2 vote not to support green energy with RECs. “Three council members supported green energy Renewable Energy Certificate integration into our supplier contract,” says Mandel. “Like Evanston and Lake Forest, which voted for 100 percent renewable energy, Highland Park could have led the way on green if the other council members hadn’t voted to write the standard 7 percent contract.” He adds that Highland Park residents can independently sign up for a 100 percent renewable energy option with MC2 that is estimated to cost only $1 to $2 more per month.
One-Stop Power Shopping
Consumers whose municipalities or counties do not form an aggregation still have choices. Shopping for power can be done online at Power2Switch.com, a website that lists rates and plans for 30 ICC-certificated retail electric suppliers that have completed the registration process with ComEd. The site, which does not request credit card or Social Security information, allows consumers to make a fee-free switch to a new energy supplier. They can review Retail Electric Supplier Complaint Scorecards at PlugInIllinois.org.
Consumers can also make a switch directly with more than 20 competing power companies. The informative CUB website, CitizensUtilityBoard.org, provides up-to-date rates for alternative suppliers. Additionally, it offers important details on the length of time that a customer must honor their contract before canceling without a costly exit fee.
Ultimately, what consumers decide will help determine the future of renewable energy in Illinois: its costs, benefits and larger impact on climate change. James Hansen believes that there is still time to create a robust clean-energy economy, but notes, “We are wasting time. The future is now. And it is hot.”
Linda Sechrist is a senior staff writer for Natural Awakenings magazine.
Power Switch Checklist
Helpful Tips and Terms
• Get all the facts. When considering potential electric providers, the Citizens Utility Board suggests asking several important questions. Is a deposit required? Are there monthly fees that inflate advertised electricity prices? Does the company assess an exit fee for getting out of the agreement or contract before the term is up, and is there an opt-out period for backing out without incurring such a fee?
• Check your real-time pricing status. Residential real-time pricing (RRTP) customers, who have an electric meter capable of measuring and recording electric usage in hourly intervals, are paying a special rate for power and may not save money with an alternative supplier.
• Understand your aggregation program. It’s necessary to determine whether your municipality/county’s program is opt-out or opt-in.
Opt-out is initially a ballot question that requires voters of a municipality or county to pass a referendum that automatically combines the electric load of residential and eligible small businesses for purchasing purposes. Most communities, including Glenview, Wilmette, Kenilworth, Deerfield, Glencoe, Highland Park, Lake Bluff, Lake Forest, Northbrook, Park Ridge and Skokie, have pursued the opt-out program. After it is approved, customers do not need to take any action in order to participate and receive the negotiated electric supply price.
You can still choose not to participate in the approved purchase program when the chosen supplier sends opt-out notices. To be excluded, fill out and return the opt-out notice to the supplier.
Opt-in means that after municipality or county authorities adopt an ordinance to combine the electric load for purchasing purposes, only those residents and eligible small businesses that take an affirmative, “opt-in” enrollment action can obtain the price negotiated on their behalf. The chosen supplier will send information to your home or business, explaining the steps you need to take to enroll.
• Pay attention to the electric supply price. According to a plan developed by the Illinois Power Agency (IPA) and approved by the Illinois Commerce Commission, Ameren Illinois and ComEd purchase the electric supply for customers that have not chosen to receive electricity from a retail electric supplier (RES). Current electric supply prices—without any markup or profit—are in effect until May 31, 2013, when the IPA will again direct the utilities to purchase electric supply for June 1, 2013 and beyond. This will result in new pricing.
Customers pay electric supply rates that vary by the hour, based on how much electricity is used monthly. Rates vary depending upon when the electricity is used.
If you do decide to switch electric suppliers, know that the switching process takes 30 to 45 days and depends upon the date of your scheduled meter reading by the utility company. Service is not interrupted, and there is no need for a technician to come to your home. You can switch by going online at Power2Switch.com or calling 847-868-0247.