If we ignore self-generation, three policies are at the center of increasing local control of energy: deregulation (“customer choice”), municipal aggregation (“city choice”), and municipal utilities (“city ownership”).  Two recent articles highlight the relative value of these policies quite clearly.

The Citizens Utility Board (CUB) of Illinois, a nonprofit ratepayer advocacy organization, just released a report on the results of electricity deregulation and municipal aggregation.

Deregulation or “Retail Choice”

CUB didn’t think much of deregulation (report PDF).  They noted that while short-term savings on electric bills were significant (customers of ComEd and Ameren Illinois saw rate decreases of about 4.5¢ and 1.5¢ per kWh, respectively, for switching to a different supplier), these savings are short-lived because the incumbent utilities’ price premium will evaporate when long-term contracts expire in June, 2013.  Some customers were signed up for cable-like contracts, with low initial promo pricing followed by rates in excess of 10¢ per kWh.  Customers can’t just switch back, either.

“CUB is concerned that many offers it is tracking charge ‘termination fees’ of up to $175 if customers want to exit a contract early,” it said.

CUB also gave non-utility electricity providers a D- for their failure to compete on anything but short-term price savings, noting that “a more sustainable competitive model would focus on promoting energy efficient and money-saving technologies.”  The industry association’s response isn’t very soothing, saying that “In other states that are further down the competitive road than Illinois, the association said consumer incentives range from half off and free power days to frequent-flier miles.”

In other words, deregulation in Illinois is mostly a marketing game with little substantive improvement in energy policy.

Municipal Aggregation

Municipal aggregation has been modestly better. Over 450 Illinois communities passed referendum for aggregation, allowing the cities to negotiate lower rates on behalf of small electric customers in their territory (combined with individual choice, nearly 2 million Illinoisans are served by non-utility providers).  Rates are similar to individual retail choice contracts, but most cities have avoided termination fees and some, like Decatur, have a provision that guarantees a price match with the utility if prices fall, or a free switch back to the utility.

Some communities have even opted for cleaner energy, via purchases of renewable energy credits (RECs).  Oak Park, IL, for example, has a contract supplying electricity with RECs from wind energy that offset 100% of the electricity consumption.  No wind power is built in Oak Park, but an equivalent amount is added to the grid elsewhere.

In general, however, CUB notes that municipal contracts haven’t done much better than individual ones at focusing on lower cost energy via energy savings, efficiency, or demand response.  Chicago’s recently signed deal is a “promising exception” (from the report):

One exception seems to be the City of Chicago’s “municipal aggregation” deal with Integrys Energy Services, which could become a model for other communities.  Chicago’s plan, compared with others, employs more of an emphasis on efficiency and demand response, and it promises a coal-free portfolio for City residents. Plus, the contract contains the strongest consumer protections that CUB has seen in the state. The City has estimated that the offer could save consumers more than $100 over the course of two years, and the contract promises to meet or beat ComEd’s supply price at all times. Finally, it allows Chicago customers to exit the deal at any time, without paying an exit fee.

Municipal Utility