More and more Illinois municipalities are viewing opt-out municipal electric aggregation programs — where the city or town chooses an electric supplier for all of its residents — as a source of revenue, which eats into the purported savings these programs provide customers on their electric rate.
Under municipal aggregation, all customers who have not already chosen their electric supplier are automatically switched to the city’s preferred provider. Customers may “opt out,” but usually only during an introductory period when the program starts. Opting-out is the best solution for customers because it allows them to find a cheaper electric rate, below the city’s rate, from competing suppliers. Opting-out also means customers don’t have to pay hidden “taxes” included in the city’s aggregation rate.
For several months, SaveOnEnergy.com has warned customers about municipalities using “aggregation” programs to supplement their revenues at the expense of customer energy savings. Rather than passing all the savings available from competition in the electric market onto customers in the form of lower electric rates, some municipalities use the aggregation program to pick a preferred supplier that makes a large donation to the city, or pays a direct commission to the city. So, instead of the aggregation supplier offering customers the lowest electric rate possible, some of the savings are diverted to city coffers.
For example, if an Illinois residential customer chooses their own electric supplier, they may be able to save 3¢/kWh or more. However, under a municipal aggregation that is paying direct revenue to the city, the customer savings may be only 2.5¢/kWh, with the other 0.5¢/kWh paid directly to the city.
For example, the Village of West Dundee, Illinois, will receive about $20,000 each year from its aggregation supplier. While that might not sound like a lot, the village only has a population of about 8,000. The Village of Campton Hills, population 11,000, is getting $11,500 as an administrative fee from its chosen supplier. These fees don’t come out of the supplier’s profits — they come out of the savings made available to customers, through the use of higher energy rates.
The village of Hoffman Estates expects to collect $120,000 in aggregation fees by year-end. That’s money its electric supplier could have applied to a lower rate if a customer had shopped outside of the aggregation, rather than directing the money to the village.
In terms of the direct impact on customers, the Village of Wood Dale is receiving about $10 per customer enrolled in the aggregation from its supplier. Again, that’s $10 that could have gone into each customer’s pocket if the aggregation program were not running.
Some municipalities have rejected such aggregation fees, considering them a tax on customers. “Our board was very unanimous in our position that that was just a hidden tax,” Gilberts Village President Rick Zirk told the Daily Herald. “If you put those fees on for essentially doing nothing, you’re just increasing the tax burden on your residents.”