Starting June 1, Commonwealth Edison (ComEd) customers on average will see monthly bills jump 21 percent, to about $82 a month from about $69 a month.
“The increase that was announced today is something that is going to affect everyone no matter who you use to supply electricity,” said David Kolata, executive director of consumer advocate group Citizens Utility Board, based in Chicago.
Electricity prices are higher because there are currently fewer cheaper players in the market. Coal-powered plants, which used to be less expensive to run, need to make investments to meet more stringent environmental regulations. They either charge higher prices to keep providing power or close down.
As a result, it’s not just ComEd customers who will see higher bills. Other suppliers, including the many private firms that compete with ComEd in Illinois’ deregulated power market, will charge more, as well.
For example, municipalities that helped switch residents to new suppliers and found bargain deals over the past several years are unlikely to snag similar savings going forward. In Chicago, customers of Integrys, which took over from ComEd as residential supplier, at one point enjoyed a savings of about 3 cents per kilowatt-hour over prices charged by ComEd. Soon the difference will be fractions of a penny per kwh.
Separate from the higher cost of electricity, power customers are expected to see an increase in the second part of each monthly bill, which covers the delivery of power.
All customers of all suppliers would see a jump of about $3 a month in their bills, if state regulators approve a hike in the delivery rate. That increase would go into effect in January on top of the $5.50 extra per month customers saw at the beginning of 2014.
ComEd is asking for the hike in delivery prices because of upgrades it has made to the electrical grid. It charges the delivery fee regardless of which company supplies the power because ComEd, a unit of Chicago-based Exelon Corp., owns the lines that carry electricity into homes and businesses. Its own customers will pay 7.5 cents per kwh for delivery beginning next month, up from 5.5 cents per kwh.
Higher prices for raw electricity aren’t coming as a surprise. The industry has known for three years that prices would spike this year because of a 2011 regional capacity auction that set prices for 2014-15.
To ensure enough electricity plus a reserve is generated to prevent blackouts, the PJM Interconnection, the agency that procures electricity on behalf of all consumers and manages the electrical grid, conducts an annual “capacity” auction. That auction decides which electricity providers will be paid for committing to run their power plants so the lights stay on.
The PJM chooses the lowest-cost mix of power from electricity operations fueled by coal, nuclear, wind, solar or natural gas, among others. Winners walk away with lucrative “capacity payments,” paid by consumers in their electricity bills, as an incentive to invest in plants and keep them running. Losers face the prospect of shutting down.
The 2011 auction came at a time when the operators of coal-fired generating plants were concerned about federal deadlines in 2015 to meet new environmental rules.
The results of the auction suggested that outmoded coal plants either bid high, hoping for capacity payments that would be generous enough to cover the cost of environmental controls, analysts say, or that those coal plant operators didn’t bid, which may have skewed the auction in favor of more expensive generators.
Travis Miller, director of utilities research at Chicago-based Morningstar, explained it this way: “You put a bunch of capital into a coal plant to keep it running or you shut it down. If power plants are not properly rewarded for having enough capacity to serve those hottest days, the lights are going to go off. Power producers are not going to invest in the generation that the system needs if they’re not able to earn adequate returns.”
ComEd disclosed the higher cost for this summer’s electricity in a regulatory filing, which disclosed that the cost of power will be 38 percent higher than it is now. Analysts had predicted even higher prices, but PJM said transmission line upgrades, a bevy of new natural gas plants and increases in energy efficiency and other factors helped mitigate the increase.
The 2011 auction for 2014-15 procured 149,974.7 megawatts of capacity at $126 per megawatt-hour in the area that includes Chicago. A megawatt-hour can power 800 to 1,000 homes. That compares with $27 per mwh consumers have been paying this year, a 367 percent increase. In 2015-16 prices are expected to increase again to $136 per mwh before normalizing.
ComEd’s competitors say there is still a reason to shop around.
Electricity customers in Illinois have a choice about who supplies electricity. The Illinois Commerce Commission hosts a website that lists prices being offered by dozens of electricity suppliers at pluginillinois.org. Customers should check the terms and conditions in their contracts to see if switching will impose a fee.
“If you go on there right now you’ll see there are quite a few offers that are below the (new ComEd) rate right now. There’s also plenty of them that are above it. It’s a mix,” said Torsten Clausen, the agency’s director of the Office of Retail Market Development.
Judy Valentine, a ComEd customer in Winfield, blamed environmental policies for hurting consumers.
“Trying to get less emissions and things into the air is the cause of this, and I wish that they would just simply stop,” Valentine said. “It’s not just this the telephone is going up, it’s all of the necessities, the food, everything is becoming a whole lot more expensive.”
Valentine, a widow who lives in a big house that she says she can’t sell in this market, said she can’t possibly reduce her electricity use any more than she has.
“The lights are being turned off constantly,” she said. “I have strips for my television sets so when I’m not watching, I totally turn all the electricity off. I don’t know what else I can do.”