5-Deregulation

The state of Illinois deregulated electric utilities in 1997 as the result of the Electric Service Customer Choice and Rate Relief Law of 1997. At the time this law was passed many Illinois communities were paying some of the highest electric rates in the country. This included the entire Illinois Power and Commonwealth Edison service areas.

ComEd was split up. OomEd continued with its monopoly on delivery of electricity. However, ComEd gave up all electricity generation. Exelon was created and it took over ComEd’s power plants. Exelon supplies the electricity and ComEd delivers it. All customers theoretically had the ability to buy electricity from any supplier. [A “supplier” was any companies that made or sourced electricity for a client. ComEd “delivers” electricity, which is still a regulated monopoly.]

This created an opportunity for other suppliers of electricity to sell electricity to clients. Since 1997 about 85% of large commercial and industrial companies have taken advantage of the ability to buy electricity from 3rd party suppliers.

Third party energy suppliers are independent and have no partnership or other special relationship with the local distributor like ComEd. In fact, technically, even Exelon is not supposed to have any special relationship. But they do in the sense that when a client does not direct ComEd to get electricity from a client specified supplier then ComEd gets it from Exelon, and charges Exelon’s high prices. That may be one reason that Exelon is one of the most profitable electric suppliers in the country.

Residential users and small commercial companies have not benefitted. At the beginning of 2011, less than 0.5% of ComEd residential customers had taken advantage of using a 3rd party electricity supplier. This was primarily due to the fact that 3rd party suppliers were going after the larger clients and ignoring the home market.

Most users of third party energy are required to sign long term contracts. This makes sense for corporations but makes little sense in the residential market. People have been burned by long term contracts, and are reluctant to make a long term commitment to do something that is new.

In early 2011, the State of Illinois modified the law to encourage servicing the residential market. Analysts now expect the residential third party energy market to explode. From less than 0.5% of homes using third party energy, analysts project 60% to 80% to convert to third party energy in the next three years.

As people become familiar with third party energy and the savings it can bring they will overcome their discomfort and try it. As they learn that they can select the way their electricity is produced and the mix of fossil fuel or renewable energy, people may like the way they can vote the country’s energy policy with their wallets.

Another issue is that the old line utilities have made little progress in using renewable energy. States like Illinois are having to mandate green energy usage. The current green energy mandate in Illinois is 6%.

Viridian by contrast supplies much more green energy — 26% in Illinois, while still enabling clients to save money. In fact the current rates for Viridian’s 100% Green product is lower than Exelon’s rate.

People in Illinois don’t need to put solar panels on their roof or a windmill in their backyard to get green energy. All they need to do is to take 60 seconds and sign up online. This is powerful stuff. And with no long term contract to sign, it is structured in a way more suited to the residential and small commercial market.

We have all grown up having no say in how energy is produced or having any choice where it comes from. This will take some getting used to. As people get used to it, I think they will like it.

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