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Illinois Retail Market Report: Municipal Aggregation Increases Market Concentration in ComEd Residential Market (Now "Moderately Concentrated")

July 9, 2013

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Copyright 2010-13
Reporting by Paul Ring •

The residential electric market at Commonwealth Edison has become "moderately concentrated," as defined by federal guidelines, due to the vast increase in opt-out municipal aggregation, according to an annual retail market report from the Illinois Commerce Commission Office of Retail Market Development.

Specifically, a year ago, the ComEd residential market had Herfindahl-Hirschman Index (HHI) values of just over 900. Generally speaking, federal guidelines view a market with an HHI below 1,500 as unconcentrated (meaning many similarly sized firms compete for the same customers), a market with an HHI between 1,500 and 2,500 as moderately concentrated, and a market with an HHI above 2,500 as highly concentrated (very few firms dominating the market).

However, with the rise of opt-out aggregations, the ComEd residential HHI has essentially doubled, to nearly 2,000, making the market moderately concentrated.

The HHI values are based on residential usage, rather than number of customers. However, there is not a substantial difference between using number of customers and amount of usage for the market share calculation, ORMD noted.

Despite this increase in HHI, ORMD noted that 37 of the 41 suppliers with residential customers at ComEd had a market share of less than 5%.

Additionally, 29 of those 37 suppliers had a market share of less than one percent in May 2013.

Only two suppliers had a market share above 15% and two suppliers had a market share between 5% and 15%, ORMD said. However, as of May 2012, only one supplier had a market share above 15%.

Most notable is that the largest supplier in the market significantly increased its market share from May 2012 to May 2013, as shown in these linked charts (click here)

The residential market in the Ameren rate zones, which had already been moderately concentrated to highly concentrated, depending on zone, saw similar increases in HHI values over the past year.

ORMD noted that whereas last year only 17% of residential shopping customers were part of a government aggregation program, more than 2.2 million, or almost 78% of the approximately 2.9 million residential shopping customers, are part of a government aggregation program as of May 2013.

Broken down by utility area, 430,298 of the 562,905 residential shopping customers in Ameren Illinois' areas are government aggregation customers and 1,803,919 of the 2,312,654 residential RES customers in ComEd's area are government aggregation customers.

ORMD also made note of the negative net switching seen for the first time in the ComEd residential market from April to May 2013, which had been first reported by Matters.

ORMD noted that municipal aggregation activity remained very high this past year, with 207 communities passing opt-out aggregation referendums on the November 2012 election ballot and another 204 opt-out referendums passing in the April 2013 election

"Based on the limited information following the April 2013 election, there is a notable increase in the average supply rate compared to the average rate of the previous aggregation referendum dates," ORMD reported

Combining the number of aggregation communities to date (including prior years), 677 communities have passed an opt-out referendum to date. The number of different "winning" suppliers, meaning the aggregation suppliers being selected by the community leaders, has increased to a total of twelve. Breaking it down further, eleven different suppliers have been awarded contracts in ComEd's area and five different suppliers have been awarded contracts in Ameren Illinois' areas. Four of the five aggregation suppliers in Ameren Illinois' area are also aggregation suppliers in the ComEd service area, ORMD said.

ORMD reported that it is exploring the feasibility of adding a push notification, or alert system, for new offers posted on the rate board. Interested customers would enter the criteria for which they wish to receive text or email notifications such as new fixed supply offers below a certain rate or with a certain term length or new "green" offers posted on

Link to ORMD Annual Report

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