Structure of the Illinois power market

by Illinois Electric Choice on November 5, 2011

The significant effect on Illinois power market was the 10 year freeze on electric rates. After the freeze expired at the end of 2006, it was followed by a drastic skyrocketing of rates on bundled default service which were provided by the legacy utilities by the beginning of 2007. This affected all customers who had not yet chosen a competitive retail supplier.

A public concern followed which led to enactment of The Power Agency Act signed into law on August 28, 2007. The law saw a provision of about $1 billion in rate relief which was meant to run for over four years for residential and certain qualifying non–residential Illinois electric customers. This marked the continuing electric restructuring process which initially started in Illinois in 1997.

Together with other enacted legislations, the Power Agency Act contains components of importance, namely;

  • The founding of the Illinois Power Agency, a state agency meant to conduct and supervise new competitive electricity procurement process and hence replacing the reverse auctions used in late 2006
  • New “renewable portfolio” standards
  • Energy efficient and demand responsive requirements on electric utilities
  • Competitive legislative declaration marketing for large commercial and industrial electric consumers. This has marked open competitive markets for larger commercial users and paved way for expanded efforts hence bringing benefits of retail choice to small commercial and residential markets
  • Funding of the Office of Retail Market Development which is charged with “actively seeking out ways to promote retail competition in Illinois.”
  • Termination of reciprocity requirement for alternative retail electric Illinois power supply. This made it possible for licensing and certifying of new be competitive retailers to sell power in Illinois.

The new developments on the part of legislature and restructuring and the establishment of new Power Procurement and Retail Market Development agencies not only brought in competition in retail making a continuance in complex electricity market, but also brings more choice with reduced affordable prices to all classes of electricity customers.

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