With $37B in Consumer Savings, Illinois Results Deemed ‘Triumph of Market-Based Public Policy’
The state law that restructured the retail electricity market in Illinois represents a “triumph of market-based public policy” that has produced $37 billion in consumer savings, concludes a study, Electricity & Natural Gas Customer Choice In Illinois—A Model For Effective Public Policy Solutions, sponsored by influential Illinois business groups.
“Illinois’ decision to competitively restructure its natural gas and electricity markets has been emphatically vindicated by the results. Supplier competition, access to broad regional energy markets and customer choice are the products of well-considered and conscientiously implemented policies to open the monopoly utility industry to market forces,” the study says.
The $37 billion in consumer savings that resulted from the Illinois Electric Service Customer Choice and Rate Relief Act of 1997 are just about evenly split between residential ($18 billion) and commercial and industrial business customers ($19 billion).
“We believe that the stunning success of the Illinois approach of reliance on market forces rather than old-fashioned regulation can serve as a model,” the business groups said in a cover letter addressed to Illinois lawmakers. “This paper describes the careful process and well-considered policies that have led to Illinois’ status as the lowest-priced energy state in the industrial Midwest.”
The letter was signed by representatives of the study’s sponsors: the Illinois Retail Merchants Association, the Illinois Manufacturers’ Association, the Illinois Chamber of Commerce; and the Illinois Business Roundtable.
“For well more than a decade prior to customer choice, average electricity prices in Illinois consistently had been significantly above the national average and were the highest among the five Upper Midwest industrial states,” the study notes. “Following the enactment of the Illinois Electric Service Customer Choice and Rate Relief Act of 1997, the state entered an era in which its average electricity price consistently has been below the national average. In 2013, the average delivered price of electricity in Illinois was the lowest among the five Upper Midwest states and among the ten lowest in the United States.”
“Electricity at our refinery is one of our biggest expenses, which is also true for many large industrial plants in Illinois. The competitive marketplace has worked by decreasing the cost for industrial users which helps us to be competitive in the industry. It’s one of the best things the Illinois legislature has done in the past fifteen years,” said John Van Der Molen, Energy Procurement Manager for Marathon Petroleum Co. in Robinson, Ill.
“I voted for competition when I was a legislator, and in my current role as Chairman of the Illinois Commerce Commission, I am pleased to see the results,” said Doug Scott, the state’s chief utility regulator.
Policy makers in neighboring states like Michigan and Indiana would do well to take note of the Illinois study. As it points out, regulated rates in Indiana and Michigan have surged by more than 30% as the cost of competitively priced electricity in Illinois has decreased by 5%, becoming the lowest in the region. In Wisconsin, regulated rates have increased by more than 26%. Competition works.