Village Board Approves Electricity Rate Referndum

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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