ICC Questions Vibrancy Of IL Electric Market

Although Illinois is showing positive signs of retail market growth, questions remain as to whether the wholesale market in Illinois is robust enough to support a competitive retail market, according to a recent report by the Illinois Commerce Commission (ICC) assessing retail and wholesale market competition in the state's electric industry.

The report was presented to the state's General Assembly and Gov. George Ryan last month.

In the report, the ICC said that it finds encouraging signals of retail market growth in some territories of the state, as well as among some customer groups. In the Commonwealth Edison service territory, a large number of customers have switched from bundled service to delivery services. In other service territories, a fairly significant number of large customers have switched, according to the report. On the other hand, the ICC continued, customer switching is still negligible or even non-existent in the smaller service territories.

In addition, the ICC points out that approximately 40% of customers that have switched to delivery services have switched to the power purchase option (PPO) service. That service is available only to the customers of the three utilities that currently assess transition fees to customers who switch to delivery services, according to the report. Since the PPO will be dropped as a service offering when utilities cease charging transition fees, customers and suppliers cannot rely on this service indefinitely, the report adds. Overall, the ICC said that the Illinois retail market is still in the early growth stage of development.

The report raises a red flag as to whether the state's wholesale market is up to the challenge of supporting a competitive retail market. One sign of a lack of a vibrant wholesale market is that a majority of the power supplied to delivery services customers is being sold to suppliers by the incumbent utilities, rather than by independent producers, according to the ICC. There are few signs, at present, that this situation will change in the near future, the state commission noted.

The ICC said that if the wholesale market in Illinois remains relatively uncompetitive, prospects for a truly competitive retail market will not be bright. Also, the report states that an uncompetitive wholesale market will create upward pressure on the prices paid by customers who choose to remain bundled customers after 2005, when the present general rate freeze is terminated.

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