In 1995, the state of Illinois moved toward restructuring their electricity market to a deregulated standard. It was then that the President and CEO of Illinois Power company shared the news with his fellow energy industry peers.

“We’ve seen the other highly regulated industries go through deregulation,” said Habb, “and competition is coming to this one.”

A deregulated electricity market offers consumers and commercial patrons a choice between competing electric providers. These providers, known more appropriately as ‘Alternative Retail Electric Suppliers’ (ARES) in Illinois, handle the service and billing for customers while offering their own rate pricing and plans.

Customers can choose to stay with the primary utility, but the actual delivery and quality of electric service doesn’t change between alternative suppliers, so the choice to switch is worry-free.

Illinois Kicks Off Electricity Deregulation

Two laws were passed just a short time after Habb promised the advent of deregulation, marking the official start of deregulation in Illinois in 1997. The Illinois Electric Service Customer Choice law and the Rate Relief law.

Under the new legislation, the two electricity utility monoplies were deregulated (ComEd and AIU). This event opened the door for enterprise-level businesses to choose their own ARES, but small commercial and residentail customers were still locked in to their utilities. These customers did, however, enjoy changes made by the state’s Commerce Commission whereby electric rates were reduced by 20% and locked in for ten years.

A Decade of Transition

Between the years of 1997 and 2007, the deregulation laws changed little from where they began in 1997. Residential and small commercial patrons were still barred from choosing an ARES at first, while the bigger industrial customers slowly embraced their new power to choose.

This ‘Mandatory Transition Period’ created a ten-year stage of gradual development for the deregulated market and implementation of laws, protocols and allowing the economy to ease in to the new competitive environment.

Residential customers were eventually granted the right to choose an ARES in 2002. However, rate caps which wouldn’t expire for another five years discouraged the retail suppliers from making residential offerings. Commercial customers, on the other hand, flocked to the new suppliers in droves, numbering in the tens of thousands by 2005.

Reinventing Residential

By the year 2006, Illinois was seeing success in its deregulated electricity market for most commercial customers, but residential patrons were still somewhat left in the lurch. While they did, at this point, have an option to switch, rate caps were still in effect, making the transaction difficult for the ARES side.

The solution came in the form of new legislation: The Retail Electric Competition Act. The law helped to dissolve some of the barriers to competition for the suppliers and raised awareness and encouragement for residential customers to switch to an ARES.

Rate Caps Expire, Prices Spike

As seen in other deregualted electricity markets, the inevitable pricing spike resulting from the expiration of rate caps hit Illinois customers just as hard as expected, with some users seeing rate hikes upwards of 50%. With the ARES community no longer bound by the caps, and the customer outcry reaching a full boil, the Illinois Power Agency Act was created to stem off the blowback. It provided a billion dollars in relief over the next four years.

Today’s Illinois Electricity Market

It’s been over 15 years since Illinois debuted the deregulated electricity market. Upon the conclusion of the ten year Mandatory Transition Period in 2007 and with the help of supplemental programs, legislation and agency efforts; electricity customers were embracing the new environment.

By 2009, although only a paltry 240 residential customers had switched to an ARES (this number would climb substantially in the following years), commercial customers who switched numbered over 70,000 strong.

As of the time of this writing, Illinois lists more than 40 available electric suppliers on their “Plug in Illinois” website and continues to support and develop the new competitive infrastructure for electricity deregulation in Illinois.