Power market turmoil puts ComEd customers at risk of summer price spikes

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Some power deals are in place for that time period from auctions in previous years, but the lack of a deal now means that roughly half of the kilowatt-hours needed for the hottest time of year will have to be purchased at market prices at the time.

The IPA conducted its usual auction for the summer last week. But while it was able to find satisfactory terms for power needs beginning next September, it couldn’t for the summer. Summer traditionally is when demand peaks are highest, as air conditioners hum during high-humidity Midwestern heat waves.

The IPA provided no reason for the summer failure. There are two possibilities: Power generators weren’t interested (unlikely) or the offered prices came in above a confidential price ceiling the IPA establishes before the bidding starts (more likely).

That leaves many residents and small businesses subject to the wild price volatility that has hit the energy markets since Russia’s invasion of Ukraine in late February.

ComEd today set a price for the summer months that reflects forward energy prices as they are now. The 8.36 cents per kilowatt-hour is up 30% from 6.45 cents per kilowatt-hour currently and up 52% from $5.49 cents last summer.

But ComEd customers won’t feel the increase in their wallets thanks to the way the Pritzker administration structured a separate ratepayer bailout for Illinois nuclear plants now owned by Baltimore-based Constellation Energy Group.

Customers have been paying about $2 extra on their bills to support the plants under the Climate & Equitable Jobs Act (CEJA), enacted last year. But, with energy prices soaring, the subsidy will disappear beginning next month. In fact, Constellation will have to rebate about 3.1 cents per kilowatt-hour to ratepayers under the law, which essentially guarantees those nukes a flat price and doesn’t allow them to collect more.

The rebate offsets the significant increase in power prices—for now.

Of course, if power prices continue to rise in the summer and there’s no further action to lock in a forward cost, ratepayers will be on the hook for more. They wouldn’t have to pay the difference until the fall.

The Illinois Commerce Commission has the option to order the IPA to schedule another power auction to lock in a summer price. If the ICC decides to do that, it must act by Friday.

The picture is completely different downstate, where Ameren Illinois delivers electricity. The nuclear subsidies under CEJA are paid only by households and businesses in ComEd’s territory.

So central and southern Illinoisans will experience directly the brunt of an even more dramatic power-price spike down there. Their costs for energy will roughly double beginning June 1, and the power-grid manager for the multistate region including downstate Illinois has warned of the potential for rolling blackouts this summer if there’s a bad heat wave due to a rash of power-plant closures.

(A different grid manager handles northern Illinois, and there are no such warnings for the Chicago area.)

The spike in electric bills downstate is emerging as an issue in the gubernatorial election this coming November. CEJA, championed by Pritzker, requires the phaseout by 2045 of coal- and natural gas-fired power plants statewide.

That makes it impossible to finance new plants to close the gap between supply and demand, industry representatives say. And other cleaner technologies, such as hydrogen, are too expensive as of now.

The governor’s team said the closure of coal plants came before CEJA’s passage, and no new plants could be constructed in time to ward off this summer’s potential problems.

“J.B. Pritzker pushed a radical total phase-out of fossil fuel power plants with massive spending and facility closures to begin over the next few years,” the campaign of Republican Richard Irvin said last week. “Now, residents in central and southern Illinois are going to pay the price for Pritzker’s misplaced priorities with the possibility of no power at all this summer.”

via Crain’s Chicago Business

April 26, 2022 at 07:15AM

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