Statement: CUB Executive Director David Kolata on today’s capacity auction results

For the second time in less than a year consumers in the state—first in Central and Southern Illinois and now in Northern Illinois—face significantly higher electric bills because of a flawed power-pricing system. Illinois’ electricity market is not working well for consumers. This price spike is one more red flag that the rules governing the capacity auction open the door for power generators like Exelon, NRG and Dynegy to make windfall profits. It also reinforces the urgency of passing the Illinois Clean Jobs bill. While power generators push to raise electric bills, the Clean Jobs Bill is the only energy legislation in Springfield that will expand efficiency and save Illinois families money. The key to solving our power challenges lie in better energy efficiency and demand response programs, which help protect consumers from a volatile market.

CUB Executive Director David Kolata

Background:

*On Aug. 21, PJM Interconnection, the power grid operator for 13 states, including northern Illinois, announced the results of a capacity auction. CUB’s Policy Department estimates that the 2018-2019 capacity price for ComEd is $208.46/Megawatt-Day. That’s a weighted average between the 80 percent of capacity that cleared under new “Capacity Performance” rules ($215/MW-day) and the remainder “base” capacity ($200/MW-day). Those prices compare with a clearing price of $120/MW-day in last year’s auction.

*CUB estimates that typical ComEd supply customers (single-family and multifamily non-space heat homes) would pay roughly $3 to $7 per month more from June 1, 2018 through May 31, 2019, compared with what consumers pay now. (The increase could be even higher for customers with electric heat.) Alternative supplier customers also will see higher prices, but that will vary by company.

*PJM holds a yearly auction that determines capacity costs three years into the future. “Capacity costs”—a key part of electricity prices for ComEd and alternative suppliers—are what consumers pay to ensure power plants are able to deliver electricity when demand is highest. Such costs are included in the supply charge on electric bills.

*This year’s auction was held under new “Capacity Performance” rules designed to financially reward power producers that continue to generate electricity in extreme weather, such as last year’s polar vortex. CUB opposed the change, saying there’s no proof it solves the reliability problem it claims to address.

*The utilities, which deliver electricity to customers, aren’t power generators, so they don’t profit off these supply rates.  However, power generators stand to reap millions because of the big increase.

*This is just the latest price spike connected with capacity auctions. This past spring, a similar capacity auction held by the power grid operator in Central and Southern Illinois sparked a 30 percent increase in summer power prices in that region. CUB joined consumer advocates in asking the Federal Energy Regulatory Commission to investigate that capacity auction.

CUB is Illinois’ leading nonprofit utility watchdog group. Created by the Illinois Legislature, CUB opened its doors in 1984 to represent the interests of residential and small-business utility customers. Since then, CUB has saved consumers more than $20 billion by helping to block rate hikes and secure refunds. For more details, call CUB’s Consumer Hotline at 1-800-669-5556 or visit CUB’s award-winning website, www.CitizensUtilityBoard.org.

 

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About Jim Chilsen

Jim is director of communications for the Citizens Utility Board (CUB)
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