Local business representatives learn ways to navigate the energy market

Journal-Gazette Times Courier, Mattoon
March 28, 2007
By Herb Meeker, Staff Writer

MATTOON -- On Wednesday, about three dozen people, including many business owners or company representatives, learned about the future of the electric market and how to keep from getting zapped.

The market can be risky with electricity prices changing by the hour and the end of a rate freeze bringing costs 10 years forward after a deregulation hibernation. Audience members at a session Wednesday learned the good and bad of the changing energy market.

During the event titled “The Key to the New Electric Market,” Rob Brown of Johnson Controls, an energy efficiency and procurement firm based in Milwaukee, Wisc., explained the gathering was designed to educate people and prevent businesses from committing to energy contracts they might regret in the future.

“Our goal today is to educate you,” said Brown, whose information concentrated on how small businesses might reduce electric costs in the new market. “The problem is there’s too much press coming out on short-term fixing.”

Brown started his presentation in Burgess Osbourne Memorial Auditorium with a primer: comparing the old electric market to the one evolving. The seminar was co-sponsored by Mattoon Chamber of Commerce, which invited many business owners to attend, and the Coles County Regional Planning Commission.

Under the old market rules, an electric customer had to purchase from a utility like Ameren of ComEd. The utility charged for the electricity and the “delivery” charges, or the costs applied to transmission lines and transformers. Those costs were dictated by tariffs and controlled by the Illinois Commerce Commission. There was no true competition and rates were frozen, which prohibited small annual increases.

With deregulation, some Illinois electricity customers can buy from a local utility or an approved provider. There is a separate billing for the energy and the delivery charges. The delivery charge is the only portion controlled by tariffs.

Brown said utilities will offer three different options for electricity billings.

There is the reverse auction rate with prices in effect until May 2008. But, Brown warned this is usually the highest rate and should be avoided. The first auction period occurred during the peak hurricane season that can have a major ripple effect on energy prices.

“Timing is everything in the electric market right now,” Brown said. “By mid-April, the pricing is expected to take off in anticipation of summer.”

But, timing gets even more crucial with a new rate method called “Real Time Pricing,” Brown said. This reflects on the reality that electric market prices change every hour. Therefore, a customer might benefit from very competitive pricing during low-usage time periods.

The problem with RTP is there are no real limits on how high those rates can go, Brown explained. This rate is recommended for customers able to load shed or turn things off at certain times.

“Not everyone can do that,” Brown said. Carol Floyd, general manager of Cromwell Group, a radio broadcasting corporation in Illinois, said her company has 12 different locations in 14 different counties and maintains a 24/7 schedule so electricity is a key concern.

RTP can be an advantage for electric users with co-generation capability to produce power during peak times.

Approved Retail Electric Suppliers offer energy through a third party, not a traditional utility. This is offering competition in the electric market for local governments, school districts and smaller businesses. ARES units must be approved by the state. But the ARES contracts can be subject to change.

Consortiums and pools are an option for many smaller businesses or governmental organizations. But Brown cautioned it is best to have “apples to apples” in the contract provisions for all signees. He recommended forming pools because they can better the chances for different members.

“In every consortium you’ll have a winner and a loser,” Brown said. “It is hard to create benefits for all customers.”

There is a shadow hanging over all these considerations, Brown said. What if the state of Illinois intervenes or the electric market is re-regulated. Brown said electrical customers should not be discouraged by the “daily soap opera” produced in Springfield every day on the electricity rate issues.

“Until everyone in Springfield gets on the same page it’s all talk,” Brown said.

“We have experienced an increase in electric rates. And it is very good to get all the information before making a decision,” said Heldman.

PADS has helped people who could not cope with higher energy bills over the last few months.

Heldman said it is important to find a solution for the high energy costs.

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