Municipal Electricity Aggregation Information

 

MEA Information

Municipal Electric Aggregation (MEA)

MEA is the result of a 2010 law that allows Illinois municipalities to purchase electricity for residents and small businesses in their community.  It allows the municipality to pool the electric supply of residents and small businesses and then seek bids from retail electric suppliers (RES) on the open market for an electric rate for its pooled MEA members. 

The MEA 2010 law requires municipalities to give residents and small businesses an opportunity to opt-out of municipal MEA programs.  If they choose to opt-out, they can purchase electricity at the default rate or they can contract directly with a RES.  These are the same choices that residents and small businesses would have if either there was no MEA or a municipality decided to not continue their MEA program.

On the “Plug In Illinois” website, is a list of retail electric suppliers that residents/small businesses could contract with to purchase electricity. The suppliers offer a variety of plans which include renewable energy, fixed/variable electricity rates, and different contract term lengths.

City’s MEA Program History

  • March 20, 2012, the voter referendum giving the City authority to establish a MEA program passed 5,206 vs. 2,866.
  • April  17, 2012, Council adopted an ordinance that amended the City Code establishing the City’s MEA program.
  • May 15, 2012, Council approved the City’s MEA Plan of Operation and Governance (POG). The POG generally outlines how the City intends to operate its MEA program.
  • May 22, 2012, Council accepted an electricity bid and authorized the City Manager to execute an Aggregation Supply Agreement with Integrys Energy Services for the City’s MEA program. Integrys agreed to provide to the City’s MEA program 100 percent renewable energy at a rate of $0.04149 per kWh for 24 months.
  • May 31, 2013, Integrys notified the City they were going to increase the MEA electricity rate from $0.04149 to $0.04315 per kWh.  Both the ICC and Midwestern Independent System Operator (MISO) had increased their tariffs and Integrys was passing along the tariff increases. Integrys’ pass-through of the tariff increases was consistent with the Aggregation Supply Agreement. The City’s current Aggregation Supply Agreement with Integrys for the MEA program expires with the June 2014 meter reads.  The City’s MEA program currently has over 30,000 members and has provided those members with more than $1.6M in electricity savings since inception.

Default Rate

The default rate is what an individual would pay for electricity if they were not a member of a MEA or if they did not contract directly with a RES.  The default rate consists of three components.

a.   Electric Supply Charge. The electric supply charge is the price you pay per kWh for the amount of electricity you use in your home. The non-summer and summer rates in central Illinois are usually different.

b.   Supply Cost Adjustment. The supply cost adjustment allows Ameren to recover costs associated with procurement, working capital and uncollectible charges. The supply cost adjustment is basically a fixed-charge that changes only when the Illinois Commerce Commission (ICC) makes changes to Ameren’s delivery service rates after an annual power supply procurement update or pursuant to ICC order.

c.   Transmission Service Charge. The transmission service charge allows Ameren to recover costs associated with transmission service. The transmission charge is set annually by the Federal Energy Regulatory Commission (FERC).

To find the most recent default rate and the rate for each of its components, see Plug In Illinois. The website also has a list of historical prices.

Purchased Electricity Adjustment (PEA)

If an individual is not a member of the City’s MEA program and they did not contract directly with a RES then Ameren provides electricity. The Ameren electricity rate is set by the ICC and it is equal to the default rate plus the PEA. The purpose of the PEA is to “true-up” any difference (over or under) between what Ameren paid to acquire the electric supply and what Ameren previously charged customers for that electric supply.  The PEA changes monthly and it can be either positive or negative.

MEA Challenges

The future of MEA is very uncertain for the following reasons:

a.   Default Rate. The difference between the default rate and market price for electricity is now small, due in large part to the expiration of relatively high-cost power supplies in the Ameren portfolio. As the gap between the default rate and the market price for electricity narrows, it becomes more difficult for a RES to provide a fixed, long-term competitive MEA electric rate that “meets or beats” the default rate.

b.   Purchased Electricity Adjustment. The default rate does not include the Purchase Electricity Adjustment (PEA). The PEA fluctuates monthly and it can raise or lower the electricity bill of an Ameren customer. When the PEA is a credit (i.e. negative), it reduces even more the gap between the default and MEA rates. The PEA range from June 2011 through March 2014 has been (-) 0.108 to (-) 1.207 cents per kWh. For a complete listing of historical PEA values, see the Plug In Illinois website. The City expects the PEA to be significantly negative through the next several months at least. A PEA of (-) 0.500 cents per kWh until March 2015 and maybe longer is certainly possible.

2013-14 City MEA Efforts

Staff has started the process to obtain new electricity rate pricing for the City’s MEA program. To date, the following steps have been completed.

a.   August 20, 2013, Council Study Session. Staff described the steps that would need to be completed to obtain new pricing for the City’s MEA program. Staff also obtained Council input on purchasing parameters to be used for the new pricing.

b.   November 19, 2013. Council adopted a resolution establishing purchasing parameters for the MEA electricity rate pricing. Purchasing parameters are listed below:

• The electricity rate is below the published summer, non-summer default rates for Rate Zone III; and
• The electricity rate incorporates reimbursement of all City costs to manage and staff its municipal aggregation program; and
• The rate complies with the Illinois Renewable Energy Portfolio Standards.

If electricity rate bids met the purchasing parameters, the resolution gave the City Manager the authority to execute a power supply agreement with a RES with no further Council action.

c.   February 25, 2014. Staff provided Council with an Information Only Report to Council advising them of proposed changes to the Plan of Operation and Governance (POG) for the City’s MEA program. The POG changes were minimal in nature.

d.  April 22, 2014. Staff obtained Council input on proposed revisions to the November 19, 2013 purchasing parameters.

e.   May 6, 2014. Council adopted a resolution revising the November 19, 2013 MEA purchasing parameters. The purchasing parameters are listed below:

• The electricity rate must be 0.5 cents per kWh or more below the annual average default rate for Rate Zone III; and
• The electricity rate incorporates reimbursement of all City costs to manage and staff its municipal aggregation program; and
• The rate complies with the Illinois Renewable Energy Portfolio Standards and shall have the highest renewable option that meets the purchasing parameters.

f.   May 2014. The City mailed letters to MEA members updating them on the City’s decision to not continue its MEA program.

MEA Electricity Bids

The City’s RFP for new pricing for the MEA electricity rate was released to the RES the week of February 10. RES responses were received on February 27. On March 12, the City asked the RES who submitted bids on February 27 to update their pricing.

MEA Status

The City will not continue its MEA program. After review of submitted RES bids in comparison to the Ameren default rate, the electricity rate that can be provided by Ameren is the most competitive rate for our residents. This does not mean the City’s MEA program has been terminated. In the future, if the City can contract for a competitive electricity rate, the City’s program can be resinstated.

Since the City’s MEA program will not continue, members have two electricity supply choices:

1. City MEA members could select a new energy supplier for the individual residence or business. A list of retail electric suppliers to choose from is available at the ICC Plug-In Illinois website. These suppliers offer a wide range of options which include renewable energy, fixed/variable electricity rate, and different contract term lengths.

2. Members could also choose to do nothing; Ameren would then be the electricity supplier for the individual residence or business. The Ameren rate will fluctuate monthly because of the PEA, and customers will have to stay with Ameren electricity service for a minimum of 12 billing months, per Ameren regulations. Ameren’s rate in June 2014 was 3.714 cents per kWh.

City Recommendation

Of the two electricity supply choices available to the City’s MEA members, the City recommendation is to do nothing and let Ameren become your electricity supplier. The City has received no electricity rate bids for its aggregation program that is lower than the Ameren default rate. The City expects the PEA to be negative through the next several months. A PEA of (-) 0.5 cents per kWh until March 2015 and maybe longer is certainly possible. When the negative PEA is subtracted from the Ameren default rate, the City expects the average Ameren rate to be less than 4.0 cents per kWh or less for the next 12 months.

Caution

If you are considering contracting with a new energy supplier, please compare the electricity rate of the new energy supplier to the Ameren default rate adjusted by the PEA. The City expects the Ameren default rate when adjusted by the PEA to be approximately 4.0 cents per kWh or less for the next 12 months.