Nearly one year ago, many mid-sized and smaller businesses at Commonwealth Edison in the greater Chicago area transitioned to a new type of electricity pricing if they still buy their electric supplies from ComEd.
Before June 2010, mid-sized businesses paid a flat rate throughout the day for their electric supplies from ComEd, as ComEd bought power ahead of time and hedged its load. However, as part of opening the market to competition, ComEd no longer buys power in advance for medium and large customers. Instead, it merely passes the cost of power in the short-term wholesale market onto customers, under a process known as "hourly" pricing, under which the customer's electric rate changes every hour depending on market conditions. A supermarket, for example, would pay one rate for electricity consumed in the morning, and a totally different rate for power consumed in the afternoon.
Generally, prices tend to spike in the afternoon and early evening, especially during the summer, due to increased air conditioning load as customers return home. Due to this demand, electric prices, which may normally be in the 5-6¢ per kilowatt-hour range, can spike to 10¢ or even 20¢ for customers on "hourly" pricing, because the grid is stressed, and because less efficient, more expensive power plants must be turned on to meet spiking demand.
Originally, only large customers at ComEd were exposed to hourly electric rates, and these customers avoided the volatility by contracting with a competing alternative retail electric supplier (or ARES) for their electricity. Under the choice now available to Illinois electric customers, businesses can shop around for a different electric supplier, and save money versus ComEd's default rates.
However, starting in June 2010, ComEd lowered the threshold for hourly pricing to customers with demands of at least 100 kW, exposing many medium and even smaller businesses to high and volatile hourly electric rates. Now, these customers pay ComEd a rate which varies every hour during the day for their power, and can spike three or four times higher than the normal price on hot, summer days.
Many medium-sized customers switched to competing electric suppliers to find lower, flat rates for their electric supplies, but a significant number of ComEd business customers in the 100 kW to 400 kW range still haven't made the switch. Typically, when customers who don't shop for power are forced to pay an hourly rate, over 90% of customers end up switching to a competing provider, because it's in their economic interest to do so to save money on their electric bill. However, at ComEd, the most recently available statistics show that over 35% of medium-sized business customers are still paying the ComEd hourly price for power, instead of switching to a lower-cost supplier.
This unusual result may be explained by the relatively calm wholesale power market Illinois and the country have seen since 2009 due to the recession, but customers should not be lulled into a false sense of security. Customers placed on hourly rates who have just continued to pay their bill each month may not have seen any major spikes in 2010 due to depressed demand, but that could change in an instant. Extreme hot weather, economic recovery, or plant or transmission outages during the summer could easily cause hourly prices to spike, exposing customers to bills double or triple their normal monthly amount.
Fortunately, because electric rates are so low, it's the perfect time to choose a competing offer from an alternative retail electric supplier who can beat ComEd's rate and also provide customers with a single price for electricity during all hours of the day. Illinois businesses can find the lowest electric rates in the market using SaveOnEnergy.com, an online clearinghouse which puts up to eight competing energy suppliers in direct, head-to-head competition for your business. SaveOnEnergy.com's simple and hassle free process means that you can save money on your electric bill, and avoid any nasty surprises from being served on ComEd's fluctuating hourly rates.