McMansion owners in the Chicago suburbs get cheaper ComEd rates than city-dwellers

Crain’s Chicago Business highlights an interesting part of the regulations for ComEd: a suburban homeowner pays a more advantageous rater than a city resident.

The reason: The price to reserve “capacity”—the right to buy electricity during peak-demand periods—will soar next June. That rising cost, which is embedded in the energy price on customers’ electric bills, will hit households consuming small amounts of power far harder than owners of large homes using a lot of electricity. Residents of wealthy suburbs with larger, high-consumption homes could well pay 1 to 2 cents per kilowatt-hour less for electricity than city residents.

Why? ComEd allocates the capacity charge evenly among all residential customers regardless of their usage. So the owner of a city bungalow consuming 500 kilowatt-hours per month pays the same dollar amount for capacity as the owner of a McMansion in the suburbs using three times as much. The McMansion owner’s total electric bill will be higher than the bungalow owner’s, but the McMansion owner will pay less per kilowatt-hour because the added capacity charge makes up a much smaller percentage of the total.

This disparity hasn’t been an issue to date because capacity costs have been unusually low over the past two years. But the price for capacity in PJM Interconnection—the 13-state power grid that includes northern Illinois—will rise 350 percent for the year beginning in June 2014. That will have a bigger impact on towns and cities with lots of small-usage households such as Chicago than it will on suburbs featuring larger homes…

Evidence of “have” and “have-not” municipalities already is starting to appear. Two wealthy north suburbs with many large homes, Bannockburn and Kildeer, last month locked in an energy price for their residents of just below 5 cents per kilowatt-hour for the next two years beginning in September. By contrast, under the Integrys contract, Chicago residents pay 5.42 cents, or 8 percent more. And next May, when the city must reprice the deal, it’s expected to struggle to beat a ComEd price that will approach 7 cents.

The article doesn’t answer the most basic question: how did this disparity end up in the regulations in the first place?

The article suggests that people in the city or suburbs should be paying the same electricity rate. It is only fair to pay equally. But, I wonder if some wouldn’t argue that the suburbanites who are more spread out, require more infrastructure to reach this larger area, and tend to live in bigger houses should actually be paying higher rates. Couldn’t that be written into the regulations? This may not be politically popular but I imagine the argument could be made. Indeed, using the term McMansion in comparison to the humble Chicago bungalow leans in this direction by referring to unnecessarily large homes.

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