Constellation to customers: Your electric rates are going UP

Click on the image to read the letter that one person received.

Residents in several towns that have community power deals with Constellation are getting letters informing them that the price they pay for electricity is going up because of a “change in law.” Let CUB explain:

What’s happening?

Under Illinois law, communities can enter into “municipal aggregation” deals with alternative electric companies to supply power to their residents. This month, alternative supplier Constellation sent out letters to residents in at least seven communities where it has a community power deal: Buffalo Grove, Palatine, Arlington Heights, Lincolnshire, Long Grove, Vernon Hills and Wheeling. The letters informed residents that Constellation’s rate was going up, from about 6.5/6.6 cents per kilowatt-hour to over 7 cents per kWh. (The letter that went out to Arlington Heights residents, for example, informed them that their electric supply rate for the three-year deal was going up by 8 percent, to 7.152 cents per kWh, for the final year of the offer, from June 2016 through May 2017.)

The increase is expected to add about $3 a month on to customer bills.

Is this happening in other communities? 

CUB is hearing reports of similar letters being sent out to residents in other towns that have electric deals with Constellation. So if your community has a power deal with Constellation, call the company (the number should be on your electric bill) to find out if your rate is going up. (Not sure if your town has a community power deal? See this list compiled by the State of Illinois.)

How do the new Constellation prices compare with ComEd’s rate?

For the seven communities above the new rate is expected to be higher than ComEd’s price. ComEd is currently charging 6.987 cents per kWh. That rate will change on June 1, but ComEd just announced that it expects supply prices to drop and customers will save about $3 per month for the next year.

What should I do?

It’s likely that ComEd is your best bet in the current electricity market. Fortunately, in this particular case, if you want to exit your community power deal you can leave without paying an exit fee. Just call Constellation at the number listed for the company on your bill. Remember, the switch back to ComEd can take up to two months to complete.

Can Constellation change the price in the middle of a contract? 

That’s a good question for community leaders who negotiated the offer with Constellation. Since the company letters mention a “change in law” several times, it’s likely that Constellation is invoking a change-in-law provision of its contract. (Sign our petition to Constellation.)

To what “change in law” is Constellation referring?

Constellation is referring to a change in rules concerning electricity auctions that determine a key part of electricity supply prices: “capacity costs.” These costs, embedded in electricity prices, are what consumers pay energy generators to ensure that a power plant can deliver electricity on high demand days.

Recently, PJM Interconnection—the power grid operator in the region—implemented new rules for these auctions. Big generators argued that the changes were needed because of the Polar Vortex of 2014, the blast of cold air during which PJM said 22 percent of the generation in its region was unavailable to serve customers. Under new “pay-for-performance” rules, power plant operators are financially rewarded if they generate electricity reliably—even during extreme weather such as the Polar Vortex.

Exelon, a power generator and the parent company of Constellation, pushed for these changes. Its nuclear power plants are unlikely to suffer cold weather outages—so it stands to benefit from the new rules.

CUB filed comments with federal regulators opposing the new “Capacity Performance” rules, arguing there’s no proof they’ll address the problem they claim to solve. While reliability is vital, CUB believes that PJM could have made tweaks to the rules instead of launching major changes. The polar vortex issues are addressed by other means [e.g. enforcing cold weather start up times and syncing up gas/electric trading windows]. Also, CUB is working to make sure other resources can be used to lower bills, namely Demand Response.

Aren’t community power deals, like Constellation’s offers, supposed to be beneficial to residents? 

Municipal aggregation saved Illinois residents millions of dollars over the first couple years these deals were in effect, but the Northern Illinois electricity market has changed significantly over the last two years. It’s now much more difficult for communities to ink deals that secure significant savings for their residents.

In fact, a recent CUB special report, as seen on CBS 2 Chicago, found that 66 communities had abandoned municipal aggregation programs and more than 100 were charging rates higher than ComEd’s current price.

CUB has a great free tool, the Power Calculator, that can help you compare your community power deal with ComEd’s rate over the last year.

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About Jim Chilsen

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