Next month’s price hike for ComEd customers just the start – Utilities News

on May23

23 May 2017 | 9:26 pm

The substantial hike in Northern Illinois’ cost of electricity beginning next month is just the beginning of the increases for years to come.

With energy costs remaining at historically low levels, the price all consumers pay qualified power generators simply to promise to produce during the highest-demand days of the year keeps rising.

These “capacity” costs—essentially an additional reservation price embedded in the energy cost ComEd customers see in their electric bills—will approach the cost of the electrons themselves beginning in 2019 and now continuing through the first half of 2021.

The bottom line for customers of Commonwealth Edison is that the 8 percent increase they’ll experience in their electricity rates over the next several months is just the first installment.

The reason: the capacity charge is set three years in advance. PJM Interconnection, the regional power-grid operator for Northern Illinois and all or parts of 12 other states to the east plus Washington, D.C., holds an auction each year at this time to establish the capacity price three years from now.

For the second auction in a row, ComEd’s capacity far exceeds the rest of the PJM region, according to results disclosed today.

Northern Illinois power users in the year beginning June 2020 will pay $188.12 per megawatt-day for the promise to keep the lights on when temperatures soar. Customers in most of the rest of the PJM region will pay just $76.53 in that year.

Increases already will begin to hit ComEd customers’ wallets next month. They will pay 6.89 cents per kilowatt-hour for energy starting in June, 9 percent more than they’re paying for power today. (Energy accounts for about half the typical electric bill, with delivery rates and other charges making up the rest.)

In October, that cost will rise again to 7.15 cents per kilowatt-hour, 13 percent above today’s price.

That will hike the total electricity rates (including the cost of delivery) about 8 percent.

By June 2019, when the capacity cost soars to $202.77 per megawatt-day from $59.37 today, that alone will hike the energy cost here to about 8.1 cents per kilowatt-hour—another 13 percent increase on top of the 13 percent increase customers will see by October.

The primary beneficiary is ComEd’s parent, Chicago-based Exelon, whose five nuclear stations in Northern Illinois supply most of the power here.

Exelon’s nuclear plants in Illinois have become substantially less profitable due to the low wholesale power prices. The higher future capacity prices will relieve some of that pressure.

In addition, Gov. Bruce Rauner signed into law late last year ratepayer-funded subsidies for two Exelon-owned nukes that have been losing money.

The level of those subsidies, which can reach $235 million annually, are determined based on what Exelon fetches in the open market.

The company will disclose tomorrow which of its Illinois plants “cleared” the capacity auction and which did not. In recent years, the Quad Cities plant, which is one of the subsidized facilities (along with downstate nuke Clinton) in the Future Energy Jobs Act, has bid too high to qualify for the payments.

If it failed to clear this auction as well, that will ensure customers pay even more.

An Exelon spokesman declined to comment other than to say more will be disclosed tomorrow.

PJM has tightened the rules for bidding into its capacity auction in a way that’s ensured the costs will rise in ComEd’s territory. PJM responded to nuclear generators, of which Exelon is the largest in the country, who complained that the market wasn’t appropriately valuing the around-the-clock production of their nukes.

PJM’s first and highest priority is to ensure there’s sufficient power to keep the lights on when demand spikes, typically during heat waves and cold snaps.

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