History of Illinois Deregulation

Many states in the US benefit from energy deregulation – Illinois being one of them. Deregulation has given Illinois residents the choice when it comes to choosing who to work with as their gas or electricity supplier. In a deregulated market, utility companies still own the infrastructure by which energy is delivered. However, while consumers can continue to purchase services from utility companies, they also have the option to purchase their services from suppliers who buy energy from generators to sell to their customers. This increases the competition between suppliers and pushes them to offer better prices for consumers to choose from. As a result, deregulation has led to a significant amount of savings for Illinois consumers.

In this post, we are going to go over the history of energy utility deregulation in Illinois, the implementation and transitionary period that followed, and the effects of deregulation.

The Need for Energy Deregulation

Prior to 1997, residents of Illinois were paying some of the highest electricity rates in the country. Because of this, the state passed The Illinois Electric Service Customer Choice and The Rate Relief Law. This law broke up the monopoly Ameren Illinois Utilities (AIU), formerly Illinois Power Co., and Commonwealth Edison Co. (ComEd) had and gave larger commercial consumers the ability to purchase electricity from alternative retail electric suppliers (ARES).

The relief law was enacted in October 1999 and made available to large commercial customers May 2000.

Deregulation Implementation and Transitionary Period

The Customer Choice law did not allow residential and small business owners to purchase deregulated energy. However, to protect residential and small business owners, the state lowered the electricity rate by twenty percent in 1997 and froze the rate for ten years.

This rate cap that would last until 2007, however, discouraged ARES from servicing residential customers. Competition amongst ARES on the commercial side, however, increased. By October 2005, it was estimated that 22,000 commercial received their electricity from ARES.

In 2006, the General Assembly enacted the Retail Electric Competition Act to help ARES plan for and develop programs to serve residential and small business consumers. The act also removed some of the barriers to competition and encouraged residential and small business consumers to switch to ARES companies. The act also established the Office of Retail Market Development.

When the electricity rate cap expired in 2007, rates soared and many residential customers saw a fifty percent increase in their rates. As a response, the General Assembly enacted the Illinois Power Agency Act and created the Illinois Power Agency. The Power Agency Act offered one billion dollars to residential and small business consumers as relief over the next four years.

Finally, by 2008, residential and small business consumers began the switch to ARES companies.

Deregulation Effects and Current Laws

In 2009, there were only eight ARES companies serving the residential customers of Illinois. By 2014, the number rose to 87.

In a report by the St. Louis Post-Dispatch, from 1998 to 2014, electricity deregulation has saved Illinois residents as much as $37 billion. Prior to deregulation in the late 90s, Illinois was the 13th highest in the country in terms of electricity averages. By 2013, Illinois was the 10th lowest.

Though deregulation in Illinois had a slow start, the savings fully justified the need to deregulate the energy industry. Santanna Energy provides commercial and residential energy services to Illinois residents. If you are ready to take advantage of savings, contact us today.