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Residential Customers On Competitive Supply At Ameren, Where Muni Aggregation Accounts for 90% of Switched Customers, Paying On Average Nearly 0.7¢/kWh Higher Rates Than Default Service

July 17, 2017

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Copyright 2010-17 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

Residential customers on competitive electric supply at Ameren, where opt-out municipal aggregation accounts for 90% of switched residential customers, paid on average nearly 0.7¢/kWh above the default service rate for electricity supply during the 12-month period ending May 31, 2017, according to a report from the Illinois Commerce Commission's Office of Retail Market Development

"[O]n average, residential RES [retail electric supplier] customers (which were overwhelmingly aggregation customers), paid about two-thirds of a cent more per kWh than Ameren Illinois’ bundled service customers between June 2016 and May 2017 when taking into account the PEA [purchased electricity adjustment]. In Ameren Illinois’ service area, the PEA was a credit for all twelve months during the last year," ORMD found.

Specifically, on average, residential customers at Ameren on competitive supply paid 0.675¢/kWh more versus default service, when including the PEA, for the 12-month period ending May 31, 2017, and 0.354¢/kWh more when excluding the PEA. That works out to an aggregate of $3.8 million (including PEA) in higher charges for Ameren residential customers on competitive supply ($2.2 million higher when excluding the PEA)

Including the impact of the PEA, residential customers on competitive supply paid on average 0.898¢/kWh more in Ameren Rate Zone I, 0.569¢/kWh more in Ameren Rate Zone II, and 0.628¢/kWh more in Ameren Rate Zone III, during the 12-month period ending May 31, 2017

ORMD made several caveats concerning the rate comparisons, which are noted in full below

Some 569,954 of the 636,235 residential RES customers in Ameren Illinois’ areas, or 90%, are government aggregation customers, ORMD reported

"This represents another increase compared to the 86% aggregation share from a year earlier," ORMD reported

The number of residential aggregation customers at Ameren increased by almost 26,000 in the last year.

While Ameren, unlike ComEd, saw a marginal increase in residential electric shopping during the 12 months ending May 31, 2017, the increase was solely driven by opt-out aggregation

Specifically, the total number of Ameren Illinois’ residential customers on competitive supply grew from 634,255 in May 2016 to 636,235 in May 2017, with gains in Ameren Rate Zones I and II offsetting a slight drop in Rate Zone III

"Given that the number of total residential ARES customers increased only by about 2,000 [versus 26,000 new municipal aggregation customers] during the same period, it means that the number of residential customers on non-aggregation RES service declined significantly in the Ameren Illinois areas during the last 12 months," ORMD noted

Only two different retail suppliers are currently serving aggregation customers at Ameren Illinois, ORMD said

"Every initial aggregation contract in the last four sets of Ameren Illinois aggregation communities (March 2014 through March 2016 referendum dates) was won by the same supplier," ORMD noted

All three Ameren rate zones have very high market concentration in the residential market (Herfindahl–Hirschman scores of about 4,000 to 5,500). Ameren’s Rate Zone II continues to be the most concentrated residential market by a wide margin.

"The fact that 90% of the residential ARES market in Ameren Illinois’ areas consists of aggregation customers, and the vast majority of the aggregation programs are with the same supplier help explain this phenomenon," ORMD said

Some 44 municipal aggregation programs at Ameren have expired, or 12%.

Concerning the rate comparisons described above, ORMD reported the following caveats:

1) These are total, or aggregate, savings and the savings for almost all individual customers differ from these averages.

2) These calculations are ex-post calculations and do not take into account how ComEd’s default rates would have been different had more or fewer customers stayed on the utility’s default supply service.

3) Most of the suppliers with residential customers have at least one offer that features a renewable energy content higher than what is required under the Illinois Renewable Portfolio Standard. The average rate information collected from the suppliers include the (usually higher) prices associated with those offers.

4) Not captured in these numbers are rewards and incentives that are not part of the suppliers’ electric supply rates. For example, several suppliers offer one-time gift cards as an incentive to sign up for a particular offer and other offers contain rewards such as airline miles and other non-rate benefits. However, those non-rate benefits are hard to include in such a calculation and would require us to make several more assumptions as well as additional detailed data from the suppliers. For these reasons we decided to compare just the average rates of the suppliers to the rates of the utility Price-to-Compare.

There was one additional factor ORMD had to take into account: the two-block rate for the non-summer months. "From October to May, Ameren Illinois’ supply rate has a lower rate for usage above 800 kWh. In order to account for this, we asked Ameren Illinois to provide us with the weighted average rate based on actual usage during those months. Given that the usage characteristics vary across the three rate zones, we had to perform the savings calculations separately for each of the rate zones, even though most suppliers did not differentiate their residential rates based on rate zones," ORMD noted

Link to ORMD report

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