Deregulation In Illinois
In 1997, the Illinois General Assembly passed and the Governor signed the Illinois Electric Service Customer Choice and Rate Relief Law. The law phased in customer choice in electric service for the customers of Illinois’ investor-owned utilities. Municipally operated electric systems and electric cooperatives were exempted from the mandatory aspects of the law, but were provided with opt-in provisions to allow future participation by their customers.
While changes have been made in the law since its drafting, the original approach remains. The law moves the state toward a system in which consumer demand sets energy prices, rather than having the Illinois Commerce Commission set prices through regulation. It also leaves construction of new power plants to market forces. (Plants are built if and when companies decide they will be profitable.) The original law allowed customer choice on a phased-in basis. First to be given the opportunity to buy energy from someone other than their incumbent utility were industrial loads. Commercial loads followed with residential customers being given the ability to choose in 2002.
However, the law also recognized that residential customers would be the last to realize any benefits from a competitive energy market. Therefore, the law initially mandated rate reductions for the state’s investor-owned systems of up to 20% and a freeze on those rates through 2005. However, in 2002 the General Assembly became concerned over the slow development of the market and voted to extend the rate freeze period to 2007.
The law set up a mechanism for the state to license so-call alternative retail electric suppliers (ARES) as entities to offer energy to customers who wish to buy from someone other than their incumbent utility. As of late 2002, there are a number of ARES approved to serve industrial and commercial customers, but no ARES have applied to serve residential customers in Illinois. In addition, a court challenge put limits on the ability of out of state utilities in non-customer choice states to sell into Illinois if Illinois utilities cannot reciprocate through retail access in their home states.
Customers who have chosen to buy energy from an ARES pay a stranded cost fee to their incumbent utility. Stranded cost recovery continues through the entire transition period. The state’s investor-owned utilities will continue to offer bundled electric service until such time as the state certifies sufficient competitive options exist.
State officials continue to reexamine the law and its effects annually and make changes as deemed appropriate.
