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Tuesday, October 25, 2011

Municipal Electric Aggregation

A number of municipalities are taking advantage of an Illinois statute that allows municipalities, after referendum approval, to enter into contacts with electricity purchase agreements on behalf of  consumers within their jurisdiction.  The agreements provide for the bulk purchase of electricity from Commonwealth Edison and then the sale of that electricity at reduced rates in municipalities that have approved the concept.  By aggregating the buying power of a large number of small customers, a municipal entity should be able to get a better deal for its customers than if they shop for electricity on an individual basis. 

To initiate the process, a municipality must place a referendum question on the ballot.  If the referendum is approved, then the municipality can choose one of two programs for the purchase of electricity.  The first type is an "opt-in" program that requires an individual customer to enroll in the electricity aggregation program before being included in the pool of customers.  The second type is an "opt-out" program that automatically includes each household in the pool unless an individual affirmatively decides not to participate.  The second type is the most popular program because customers are more likely to utilize this service if it is provided to them on a default basis.  The municipality must then develop a plan of operation and governance for the aggregation program and hold at least two public hearings on the plan.  An RFP must be prepared and issue for the services, and the municipality must notify customers of the rates, conditions of enrollment, and if applicable the option for customers to “opt-out” of the aggregation.
Because of the complexity of the process, many municipalities have either retained a consultant familiar with the electric aggregation process or joined forces with other municipalities in moving forward with the aggregation process.

In 2011, 24 municipalities in Illinois placed referenda on their ballots.  21 of these referenda were approved.  Given the popularity of this program, many more communities are likely to place referenda on the Spring 2012 ballot.

For more information about electric aggregation, you might review the article published by the Illinois Municipal League in the October 2011 edition of the Municipal Review.  


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