History of deregulation in Illinois

by Illinois Electric Choice on November 7, 2011

Though it might at times seem complicated, electricity deregulation is usually simple. The only idea concerning deregulation is competitiveness provides a means for reduced electricity cost to the consumer. With Illinois Electricity Deregulation of the market, even though both commercial and residential users are able to continue purchasing electricity from their utilities, they are still at liberty to buy electricity from competing Illinois power providers. These are commonly referred to as alternative retail electric suppliers (ARES).

With a deregulated market, the utility is the key transmitters of electricity. The distribution is done to homes and businesses, no matter the electric provider supplying it.

The history of Illinois electricity deregulation is dated back in 1997. Legislation was passed deregulating the state’s two largest electricity duopolies. This was after two years of Habb’s speech after which the legislators passed the Illinois Electric Service Customer Choice and Rate Relief Law of 1997. Deregulation of the two, Ameren Illinois Utilities (AIU) and Commonwealth Edison Co. (ComEd) enabled large commercial customers purchase electricity from approved ARES.

The decade between 1997 and 2007, normally known as Mandatory Transition Period, choosing of electric provider was reversed.  With Customer Choice Act, owning means of energy production by state utilities were no longer permitted. During this period, utilities were to sell their means of power generation to other affiliated and unaffiliated energy companies. These companies were the only ones to make electricity deliveries. In 2006, ARES began to serve residential and small business customers. This was as a result of passage of the Retail Electric Competition Act which established the Office of Retail Market Development, removing certain barriers to competition. The residential and small businesses were further encouraged to use an alternative electric provider through promotion of temporary, fixed-discount programs.

After the expiry of rate caps on the utility’s electricity on Jan. 1, 2007, Illinois power rates skyrocketed. A 50% rise was experienced by the residential customers. This led to public criticism resulting to the amendments of the Customer Choice Act. In addition the Power Agency Act was passed. This phased the provision of over $1 billion electricity rate relief to residential and certain commercial customers.

The period during 2008 saw the first users switching to alternative electric provider. During this period also, the number of small business, commercial and large industrial customers that had switched from start of deregulation doubled to 55,000. From this point, the effect of deregulation started impacting and by the end of 2009, there was gradual building up of residential electric provider competition. By 2011, a great stride has been achieved towards increased competition.

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