Integrys Energy Services, a sister company to Peoples Gas, is the city’s choice to supply electricity to about 1 million residents, Mayor Rahm Emanuel announced Friday.
The deal, subject to the approval of the City Council, is expected to save Chicagoans $130 to $150 off their electricity bills through May 2015 when the agreement ends. It’s also the largest of its kind in the country; the city will negotiate on behalf of residents.
The company, a subsidiary of Chicago-based Integrys Energy Group, was chosen from eight bidding companies. Mayor Rahm Emanuel said the deal will save Chicagoans 20 to 25 percent a month through June after which time the savings will drop to 8 to 12 percent compared to Commonwealth Edison’s rates.
Emanuel said Friday that negotiating for better electricity prices for Chicagoans “we have secured an agreement that will put money back into the pockets of Chicago families and small businesses.”
The deal also switches residents to electricity with fewer carbon emissions by eliminating power produced from coal from the city’s electricity mix. Currently, about 40 percent of the electricity used to power Chicago homes is generated from coal.
“Chicago took a big step beyond coal earlier this year by eliminating coal-fired generation within its borders,” said Jack Darin, executive director of Sierra Club’s Illinois chapter and a member of the advisory committee for the electricity deal. “Now we have a chance to reduce or eliminate it entirely from our power supply. That’s a giant step toward healthier air and clean, renewable energy that supports good paying jobs in the technologies of tomorrow.”
The no-coal provision is largely symbolic since there is no way to know how an individual electron is generated once it hits the power grid. For power suppliers, it is largely a matter of accounting. The new supplier will carve off a portion of its portfolio for Chicago that does not include coal.
In the end, of the eight companies that responded to the city’s request for qualifications, only Exelon-owned Constellation NewEnergy and Integrys-owned Integrys Energy Services said Friday they had been asked to make an offer.
Sources close to the deal say the final decision came down to price. The city did not make bidding documents available to the public, saying the information would threaten the integrity of the bidding process. The documents are not expected to be made public until after a City Council vote on the project next Wednesday.
The City Council is scheduled to vote on the contract Wednesday, after a public hearing Monday at the Finance Committee.
The contract is by far the largest of its kind attempted in the U.S. and would mean more than $300 million in yearly revenue to Integrys.
Other companies that vied for the contract were IGS Energy, Ameren Corp.’s Homefield Energy, Centrica-owned Direct Energy, American Electric Energy-owned AEP Energy (formerly BlueStar Energy), FirstEnergy Corp.-owned FirstEnergy Solutions and NRG Energy Inc.-owned NRG Energy Services.
The size of the contract quickly narrowed the field from about 150 eligible suppliers. The deep discounts similar deals have garnered in the suburbs are more difficult to come by for a contract the size of Chicago. At the same time, the company that wins the deal is taking on considerable financial risk. Its customer base is expected to come and go at will. Also, if electricity prices rise, the supplier risks having a huge portion of its revenue tied up in a money-losing contract.
Even after the deal goes through, ComEd will still be responsible for delivering electricity and keeping the lights on. ComEd, a “wires only” utility, makes its money from delivering electricity, not from supplying it. New bills, scheduled to begin arriving in February, will look like your old bill, except that the portion titled “electricity supply services” will have a new rate and include the new supplier’s name.
Chicagoans will also have a chance to opt out of the deal and choose their own supplier or stick with ComEd. Chicago has said it will issue instructions about how to opt out through the mail in mid to late December. Chicagoans would be switched to the new supplier throughout February.
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