ACTION REQUESTED:
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Communication from the City Manager with a Request to ADOPT an ORDINANCE Amending the City of Peoria 2022-2023 BIENNIAL BUDGET to Include $45,000.00 for a MAILING to Municipal Aggregation Customers.
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BACKGROUND: On April 14, Midcontinent Independent System Operator (MISO) held the Midwest capacity auction and the results were unexpectedly high. During the last auction, rates were $5.00/MW-day. Capacity is the component of power rates that provides payments to generators to maintain operations for grid reliability. At the auction, the region that covers the Ameren part of Illinois, Indiana, Iowa, Kentucky, Michigan, Minnesota, Missouri, Montana, North Dakota, South Dakota and Wisconsin ended at $236.66/MW-day. The other zones in the auction included Arkansas, Louisiana, Mississippi and Texas ended at $2.88/MW-day. Utilities that entered the MISO auction without enough owned or contracted capacity to cover their requirement (load plus reserves) will pay these prices for the amount of capacity they are ‘short’. The cost impact to consumers of those utility with a shortfall will depend on the amount they are short and the utility’s retail rate arrangement with their state regulator. Utilities that entered the auction with sufficient capacity to cover their requirement will not need to purchase capacity at these prices.
The soaring capacity auction prices signal a shortfall of generation reserves across the entire Midwest region. This affects all parties in the energy space, including Ameren’s utility default rates and aggregation contract prices. MISO stated that Illinois is one of 11 states where there is not enough owned or contracted capacity by local electricity generators, and therefore these areas will pay increased prices for limited supply. One reason cited for the shortfall is that as fossil fuel plants are phased out, renewable energy sources, while increasing, have not come online fast enough to replace the lost capacity. Additional contributing factors include the high demand for energy globally as well as the market turmoil caused by the conflict in Ukraine. MISO also said brownouts, which are an intentional lowering of voltage by a utility for a short period of time, are possible.
From June 1 through September 30, residential Ameren utility rates will be 10.628 cents per kilowatt-hour. The rate increase, effective with the June billing period, reflects dramatic market price increases throughout all forms of energy. This rate will likely increase in the winter, averaging close to 12 cents per kilowatt-hour.
The City purchases energy on behalf of 38,500 households and small businesses in Peoria through our Municipal Aggregation Program. In addition to Peoria, our buying group includes Peoria County, West Peoria, Peoria Heights, East Peoria, Germantown Hills, Morton, Tazewell County and dozens of other communities. When our consultants from Good Energy attempted to purchase energy (through Dynegy/Homefield and Constellation Energy) the turmoil in the markets led to both companies not offering us prices or contracts that we could execute. For the next year, everyone in the purchasing group that is a Homefield Energy customer will be on the Ameren pricing (about 12 cents per kilowatt-hour) through May 31, 2023 - a 12-month suspension of the aggregation program.
Residential and small business customers can seek alternative rates through the Illinois Commerce Commission website (www.pluginillinois.org <http://www.pluginillinois.org> ). As of this date, most published energy offers are higher than the Ameren published rate. Customers do not need to take any action for the transition from the aggregate supplier of energy to Ameren during those months. Customers who take no action will return to the aggregation supply program once the contract is signed.
Staff would like to send an informational postcard to Peoria residents that participate in our aggregation program explaining to them the issue with electricity rates and what they can do. The estimated cost of the mailer would be $45,000.
FINANCIAL IMPACT: The cost of the mailing would be approximately $45,000 and would come from General Fund balance.
NEIGHBORHOOD CONCERNS: Higher energy costs are everyone’s concern and making people aware of the higher rates is important.
IMPACT IF APPROVED: Staff will send a mailer to the 38,500 households and small businesses affected by the rate increase.
IMPACT IF DENIED: Staff will not send a mailer.
ALTERNATIVES: Staff could continue to issue press releases informing the public of the higher energy rates.
EEO CERTIFICATION NUMBER: N/A
WHICH OF THE GOALS IDENTIFIED IN THE COUNCIL’S 2017 - 2032 STRATEGIC PLAN DOES THIS RECOMMENDATION ADVANCE?
1. Financially Sound City
WHICH CRITICAL SUCCESS FACTOR(S) FROM THE COMPREHENSIVE PLAN DOES THIS RECOMMENDATION IMPLEMENT?
1. Support sustainability.
2. Reinvest in neighborhoods.
DEPARTMENT: City Manager's Office