The Utility Formerly Known as CIPS
In my last post I started to describe the history and role of planning/management of electric utilities. Using the tool of energy utilities, only two proposals for southern Illinois appear to be publicly under consideration.
1) Carbondale, IL is proposing to acquire Ameren’s local distribution infrastructure (poles, wiring, substations, building meters, etc. and buy power from the ‘competitive’ market.
2) A group of municipal mayors is looking into forming a power purchase company to attempt to get power at a lower bulk rate.
The legislation for option #2 is what legislators call the “Southern Illinois Aggregate for Viable Energy Solutions.” Now there’s a warm and fuzzy name if I ever heard one! Do we call it “SIAFLVES” or maybe “The Utility Formerly Known as CIPS?”
Marketing aside, the two options leave far too much to be desired. Mayor Cole proposes to acquire Ameren assets through eminent domain. This would put the City under obligation to maintain that infrastructure. Carbondale could bid it out to private vendors to manage, or the City could do the work with city employees. They would need to be trained. This is certainly possible. The City already operates sophisticated drinking and wastewater treatment plants.
What would either proposal gain the city and its taxpayers? Under the new electric rate structure from Ameren a theoretical $100 a month electric bill looks like this:
Customer Charge $6.24 6.2%
Meter Charge $3.62 3.6%
Distribution $16.42 16.4%
Supply $67.47 67.5%
Subtotal $93.74
Tax $ 6.28 ~6.3%
TOTAL $100.02
That $100 bill provides the customer approximately 848 Kwh. About 10% represents fixed costs of serving a residence. Distribution (the portion Mayor Cole wants to acquire) constitutes 16.4% and the biggest portion of the bill is for the actual electric power supplied the consumer (67.7%). Taxes are about 6.3%.
I suspect there is little room for cost savings in the distribution portion of the bill. Its only about 2 cents per Kwh delivered. Acquiring the distribution system would be very expensive, fraught with problems with fair valuation, and legality. Yet, it is possibly a prerequisite to forming a truly independent local municipal utility.
The real money potential is in the supply portion of the bill. Ameren’s residential customers are now paying slightly under eight cents per Kwh. One year ago it was only about seven cents per Kwh. All-electric customers were paying even less.
For every one-cent decrease in the energy supply charge, a customer saves over 17% on their bill.
Acquiring cheaper energy has the greatest potential for saving money, or at least reducing future increases. There are three possible ways to lower the cost of electricity. Either engage either supply-side solutions or demand-side solutions. The first two are supply side:
The legislation for option #2 is what legislators call the “Southern Illinois Aggregate for Viable Energy Solutions.” Now there’s a warm and fuzzy name if I ever heard one! Do we call it “SIAFLVES” or maybe “The Utility Formerly Known as CIPS?”
Marketing aside, the two options leave far too much to be desired. Mayor Cole proposes to acquire Ameren assets through eminent domain. This would put the City under obligation to maintain that infrastructure. Carbondale could bid it out to private vendors to manage, or the City could do the work with city employees. They would need to be trained. This is certainly possible. The City already operates sophisticated drinking and wastewater treatment plants.
What would either proposal gain the city and its taxpayers? Under the new electric rate structure from Ameren a theoretical $100 a month electric bill looks like this:
Customer Charge $6.24 6.2%
Meter Charge $3.62 3.6%
Distribution $16.42 16.4%
Supply $67.47 67.5%
Subtotal $93.74
Tax $ 6.28 ~6.3%
TOTAL $100.02
That $100 bill provides the customer approximately 848 Kwh. About 10% represents fixed costs of serving a residence. Distribution (the portion Mayor Cole wants to acquire) constitutes 16.4% and the biggest portion of the bill is for the actual electric power supplied the consumer (67.7%). Taxes are about 6.3%.
I suspect there is little room for cost savings in the distribution portion of the bill. Its only about 2 cents per Kwh delivered. Acquiring the distribution system would be very expensive, fraught with problems with fair valuation, and legality. Yet, it is possibly a prerequisite to forming a truly independent local municipal utility.
The real money potential is in the supply portion of the bill. Ameren’s residential customers are now paying slightly under eight cents per Kwh. One year ago it was only about seven cents per Kwh. All-electric customers were paying even less.
For every one-cent decrease in the energy supply charge, a customer saves over 17% on their bill.
Acquiring cheaper energy has the greatest potential for saving money, or at least reducing future increases. There are three possible ways to lower the cost of electricity. Either engage either supply-side solutions or demand-side solutions. The first two are supply side:
1) Buy it in the open market from suppliers with excess capacity that can sell power cheaper than Ameren.
2) Build your own energy production system using the cheapest long-term fuel source that has the least negative impacts upon the environment. That cheap source is probably not coal and it more likely to be wind, biomass and solar.
3) Implement demand-side energy conservation measures that lessen the need for off-site energy delivery.
In any utility network, reducing the need for one unit of power is the same as producing one. If the utility can recover the cost of conserving power and do so cheaper then producing it, then it is in the best financial interest of the utility and consumers to pursue that option.
What are the ingredients of a demand-side solution? Building insulation, high efficiency windows, radiant barriers, energy efficiency building codes, high efficiency lighting such as LEDs and compact fluorescents, high efficiency heating and cooling systems, and lifestyle adjustments. No rocket science required!
One has to wonder why our political leaders aren't giving more attention to demand side solutions.
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