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Village Board Approves Electricity Rate Referndum

Trustees agree to put electrical aggregation referendum on Nov. 6 ballot that could save residents between $200 to $400 annually on electricity bills but hiring a broker to negotiate a lower rate with electrical suppliers is still up for debate.

Oak Lawn trustees but crossed swords over hiring a broker to negotiate a lower rate with an electrical supplier recommended by the public works committee.

Trustee Alex Olejniczak (Dist. 2) questioned if a consultant—Progressive Energy Group of Evergreen Park—was actually needed to negotiate a lower rate on behalf of the village.  

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“I’ve been buying energy on the open market in my business for 15 years,” Olejniczak said. “It’s complicated but when you really break down and look at what needs to be done, it’s clearly not that complicated.”

Before municipalities can enter into electrical aggregation agreements, the issue must be approved by a referendum. Voters will be asked whether to authorize the village to negotiate a lower power rate with an electrical supplier for residential and small business customers.

If the referendum is approved, Oak Lawn’s 19,000 households and businesses that choose to participate in the aggregation program will see an average savings of $200 to $400 per year on their electricity bills.

Electrical aggregation programs are becoming increasingly popular because of ComEd rates, which will increase from 7.9 cents to 8.3 cents per kilowatt-hour in October. Aggregation programs typically lock in rates of 4.5 cents to 4.9 cents per unit of electricity.

Electrical aggregators work with municipalities in developing a plan of operation, which is submitted to the Illinois Power Agency for review, and drafts a request for proposals based on a community's electrical usage.

The aggregator also conducts two public hearings required under state statutes prior to the referendum.

Olejniczak said that Progressive Energy’s proposal was too open ended. The village does not directly compensate the electrical aggregator. Instead, the broker’s fee is figured into the negotiated rate with the electrical supplier, which is passed on to the consumer.

Progressive Energy provided a boilerplate municipal aggregation consulting agreement with Big Rock, IL, in its proposal to the village board. According to Big Rock consulting agreement, Progressive Energy’s broker fee is not to exceed .00025 per kilowatt.

The cost of the broker’s fee to residents and businesses that choose to participate in the aggregation program is approximately $2.08 per bill. Olejniczak said the consultant’s fee would cost Oak Lawn’s 19,000 households and businesses over $400,000 for one year, and almost $1 million for two years.

According to the terms of Progressive Energy’s power supply agreement, the broker’s fee figured into customers’ electricity bills remains in effect for the term of the power supply agreement.

“I’m not used to seeing compensation to consultants for performing the service,” Olejniczak said. “It’s just way too open-ended. I think we owe it to residents to keep it in house and help them save that much money per household.”

Trustee Tom Phelan (Dist. 6) said there was enough expertise in house to consider eliminating the consultant.

“We have Trustee Olejniczak who’s done this in private business for more than ten years, and Trustee [Bob] Streit who’s in the business,” Phelan said,

Streit (Dist. 3) blasted Oleniczak for putting out “misinformation.” He said the cost of the broker’s fee would come out to $3 to $5 per household, or $100,000 annually. Streit later revised the annual broker’s cost to households at $65,000 per year.

“Trustee Oleniczak points out that we can do this in house,” Streit said. “Once the referendum passes in November we’re going to want move quickly. With all due respect to [village] staff, I think the aggregator will be more prepared to move quickly than our staff could.”

Streit said the aggregator’s fee was a small amount compared to the $6 million residents and businesses would save annually on their electricity bills.

Olejniczak said he could not vote in favor of a consultant where the fee was not spelled out in the proposal.

“We haven’t done our homework,” Oleniczak said. “[Streit] has come up with smaller fee thn mine. I don’t think it’s reasonable for a broker to be paid $120,000 to do something that staff can do. I think we should put the money back toward the residents and save them more money.”

The village board voted 4-3 to authorize Village Manager Larry Deetjen to negotiate a rate with Progressive Energy, to go before the board for approval at the next meeting on Sept. 11.

Should Oak Lawn hire a broker to negotiate a lower electricity rate with an electrical supplier? Tell us in the comments.

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Mel August 21, 2012 at 01:43 PM
The Village should pre-qualify and bid out the consultants as well to verify their capabilities as well as their success with rate structures and contract negotiations. There are plenty of them out there who have been negotiating and bidding contracts for municipalities as well as commercial real estate owners for many years (with and without aggregation)...Independent Energy Consultants, Satori Energy, etc....some are commissioned by the suppliers with no charge to the consumer.
Sitting in Row Six August 21, 2012 at 03:05 PM
It never ceases to amaze me that you can put any article on the Patch and the ignorant few flock to the typewriter to pass aloing idiotic ideas without any basis in reality or fact. NO town in Illinois has entered into a five year contract with an alternative supplier because the savings would not be as good. If you don't want to individually be in the free market, you can stay with Com Ed and pay its rate. That isn't guaranteed for five years either and seems to go up on a yearly basis. As for a consultant, didn't the village interview two consultants? There are only about five in the whole state, including Streit's company. Since he can't do it, I would say interviewing two out of four is pretty good. Let's put the pedal to the medal and start saving. After reading the story, it makes it clear that Alex doesn't know didley. Buying electricity for his employer's warehouse doesn't qualify him to talk about aggregation. Look at our neighbors in other towns who are already saving money and didn't pay $400,000 a year in fees. Alex simply made the numbers up because he wants to stop a good idea that wasn't his idea. Streit is actually in the business, I think I'm going with the numbers he is talking about
Diana Kutnar August 21, 2012 at 08:22 PM
You have got to be kidding----politicans (trustees) involved in this electrical process. So who is going to make a few bucks off of this ??? I'll stick with COM ED---Please Oak Lawn look at you empty stores---get some businesses coing in here"""""""""""
Alexdontknow August 22, 2012 at 12:27 PM
Ok Diana stay with Com Ed but let the rest of us save 30 percent. Every village is doing this and some have already gotten their prices. Com Ed hasn't been the low bidder in any village. Would you rather pay .787 to com ed or .474 like Palos Park is paying?

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