Buying Electricity in Chicago: An Update on Aggregation

by Suhail Barot

In November 2012, Chicago residents voted to allow the City of Chicago to establish a municipal aggregation program for electricity purchasing. Municipal aggregation programs allow municipal governments to buy electricity for their residents and businesses instead of relying on the electric utility to do so. The major motivations for these actions for this were to obtain a lower electricity rate for city residents as well as a cleaner electricity supply.

The program came into effect on January 9th of 2013, with Integrys Energy Services chosen as the Chicago’s supplier. A recent study by the Illinois Institute of Technology has evaluated the success of the program so far, finding that the program has resulted in a 16% reduction in carbon emissions associated with the Chicago’s electricity usage, equivalent to 100,000 cars.

This has been accomplished by purchasing almost all of Chicago’s electricity from the Marcus Hook power plant, a natural gas power plant near Philadelphia, PA (pictured below). The City has recently announced an agreement to supplement this with a small amount of Illinois wind power, equivalent to 5% of its usage.

Marcus Hook power plant PAThe purchase of electricity from Pennsylvania is made possible as Chicago lies within the PJM electricity market, thus allowing for trading of electricity by any market participant. This switches the city away from its previous reliance on coal and nuclear power. However, the operation of the market means that in the short term, these coal- and nuclear-generated power streams are simply assigned to other grid participants who previously used the gas-fired power now assigned to Chicago.

The lower carbon footprint seen from this program applies to only about a fifth of Chicago’s total electricity consumption; the study notes that about 5 billion kWh of electricity are supplied through the aggregation agreement while a CNT study of the Chicago’s carbon footprint notes that the city used 24 billion kWh of electricity in 2005. The remainder of the electricity is used by larger industrial, commercial or educational facilities that have made their own arrangements for electricity supply.

The City’s program has also saved participants about 21% on the electricity supply component of their bills, resulting in an overall savings of $21 million during the past 6 months. These savings were obtained as Commonwealth Edison was constrained by older contracts that forced it to purchase nuclear power at a rate above the market price. Those contracts expired this summer, allowing ComEd to reduce its prices to 5.511 cents / kWh, which is now only slightly higher than Chicago’s negotiated rate of 5.42 cents / kWh.

As Chicago’s cost advantage decreases, it remains to be seen whether the City will continue to green its electricity supply or revert to dirtier power. The City is expected to struggle to beat ComEd’s price when it must renegotiate its contract with Integrys next May.

BarotSuhail Barot is a Visiting Instructor of Sustainability Studies at Roosevelt University in 2012-13. Trained in electrical engineering and natural resource management at the University of Illinois, he has expertise in energy, waste, recycling, and environmental policy.

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