Significant Electricity Rate Hike Likely on Heels of Auction

ECE News

Brad Petersen, ECE ILLINOIS

Story Highlights

  • Prof. George Gross predicts that the price of electricity will jump sharply after the upcoming electricity auction.
  • There are all kinds of inflationary pressures. Were going to have easily a large increase in terms of electrical rates in the state, with some estimates exceeding 50 percent, says Gross.

ECE Professor George Gross
ECE Professor George Gross

URBANA, ILL—George Gross, a professor of electrical and computer engineering at the University of Illinois at Urbana-Champaign, says that Illinois consumers should be extremely interested in the upcoming electricity auction scheduled for Tuesday, September 5.  The auction will determine just how significant an increase Illinois residents and businesses see in their electricity rates starting January 1.

“The price of gas has gone up. The price of generation is going up.  There are all kinds of inflationary pressures. We’re going to have easily a large increase in terms of electrical rates in the state, with some estimates exceeding 50 percent, ” says Gross, who also notes that current prices are artificially low.

A major concern is that the auction, which will essentially match companies that generate electricity with distribution companies like Ameren and Commonwealth Edison, be ethical and fair.  The Illinois Commerce Commission (ICC) has appointed an auction monitor to oversee the proceedings.

“The role of the auction monitor is crucial.  The incumbent must carefully study the nature of the rules and protocols to ensure that there are no possible ways to exercise collusion between either buyers or sellers,” explains Gross.  “This is particularly important given the fact that a single corporation may own both a seller and a buyer.  Good policy demands an effective procedure to ensure the consumer interests are protected.”

“The devil is truly in the details.  That is what we need to pay attention to on September fifth,” says Gross.  “We are all interested in effectively harnessing competition and so it is desirable to have as large a group of sellers as possible to insure that competitive forces work.  At the same time, we need to ensure that the rules are fair to the sellers in order to encourage as large a participation as possible, including all potential out-of-state suppliers.”

Ultimately, the ICC will determine whether or not to accept the results.  The ICC also determines when the rate increase will be implemented, although it is scheduled for January 1, 2007.  Auction results are scheduled to be available in a public report in December.

“By December there’s going to be very little we can do about [the impending rate increase],” cautions Gross.  “So, the sooner the public sees the results, the better.  We should have the data at the same time the companies have the data.”

Gross is also a professor with the Institute of Government & Public Affairs and a member of the Information Trust Institute’s Trustworthy Cyber Infrastructure for the Power Grid center.

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