Illinois recently celebrated the15th anniversary of their electric choice legislation. Passed in 1997, the bill to restructure the electric industry has reaped an estimated $31 billion in benefits for consumers.
Before electric choice, prices averaged 12 percent above the national average. Since restructuring, prices are on average seven percent below the national rate. Vince Perisco and Philip Novak, the former lawmakers responsible for electric choice, note, ?electricity prices nationally have risen an average of 46 percent; Illinois electricity rates have risen 17 percent, about one-third the national pace and well below the rate of inflation.?
Robust competition is largely responsible for the lower rates. There are now 75 licensed retail electricity suppliers competing in Illinois which provides about two-thirds of all the electricity consumed in the state. Apart from individually initiated shopping, much of the decision making is taking place at the local level through municipal aggregation. Last November, more than 450 communities, including Chicago, had authorized municipal aggregation programs.
Municipal aggregation allows local governments to enter into competitive electricity supply contracts on behalf of residential and small business customers within their jurisdictions. Customers can opt out of the program and choose their own supplier if they wish.
Now contrast the success of Illinois to their neighbor in the North. Before the passage of electric choice, Illinois?s average electricity rates were 47 percent higher than Wisconsin?s. In fact, billboards appeared along the border advertising the gap in order to entice businesses to relocate across the state line.
During the 1990?s while Illinois struggled to create a more competitive and efficient electric system Wisconsin opted to keep a monopoly structure without competition among suppliers. The result? Average electricity prices in the Land of Lincoln are now 22 percent lower than Wisconsin?s and there is no reason to believe the badger state?s prices will stop escalating anytime soon.
Illinoisans may have to deal with more regulations, higher taxes and an overall higher cost of living, but their electricity is cheaper. It just goes to show that Electric choice can provide significant benefits to consumers wherever it is pursued.
It?s time for Wisconsin and other monopoly states to take a page from Illinois?s playbook and move ahead with competitive markets for more affordable electricity.
