Naperville officials are weighing a possible overhaul of how the city purchases electricity, one that could give city leaders more control but also require up to $39 million in deposits and reserves, along with more frequent utility rate reviews.
What happened?
One proposal discussed at the Naperville City Council's July 21 meeting would have the city-owned electric utility participate in the market without owning power assets, City Manager Doug Krieger said, according to NCTV17.
City officials have been examining utility supply options after most council members chose to pause negotiations on extending Naperville's agreement with the Illinois Municipal Electric Agency past 2035.
In that scenario, the city would secure both electricity and capacity from the PJM Wholesale Market, the largest wholesale electricity market and high-voltage power grid in the United States, rather than continue under a provider arrangement that currently covers those responsibilities.
"As a market participant, we are going to be responsible for functions, some of which are currently being executed by IMEA," Krieger said.
Krieger said joining PJM would require significant cash on hand at the outset. He told council members the market operator bases its deposit requirement on periods of peak demand, meaning an estimate that started at $12 million could rise substantially.
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"The $12 million figure was for one month, but typically they would require two months of your highest electric use. So for us it would be about $24 million," he told council members.
He also said setting aside money for a rate stabilization fund, using the IMEA approach as a guide, would add about $15 million.
Why does it matter?
Decisions about electricity procurement can affect household budgets, business expenses, and the city's ability to plan for reliable service.
A market-only approach may look leaner because the city would not own generation, storage, or transmission assets. But it could also leave the community more exposed to sudden swings in power prices.
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On the benefit side, "There are no long-term assets, and, therefore, no long-term liabilities associated with this," he said.
But he also identified what he sees as the biggest drawback: "Really, the main one is price volatility, which can provide significant adverse financial risk."
Because of that volatility, Krieger said utility rates would probably need to be revisited every three months if the city chose this route. Council members also discussed whether a 2028 rate increase might be needed to help create the stabilization fund.
What's being done?
Naperville has not committed to this option yet. City leaders are reviewing several possible paths for the utility's future, including an asset-owning market participation model and joint action agency participation, according to NCTV17, as they compare the risks, costs, and operational demands of each model.
If Naperville ultimately moves ahead with the market-only approach, Krieger said the city would need to establish or outsource an energy management office and work with a rate consultant as part of a future rate study.
Councilwoman Mary Gibson noted that the city already pays for similar expertise through IMEA.
"Right now, IMEA does this for us, but it's also part of the package that we're paying for … so it's a cost that we're paying now," she said.
Before taking action, council members said they want clearer side-by-side information. Councilman Patrick Kelly asked for examples from nearby municipalities and details on the ways those communities protect themselves when buying power on the market.
"Communities are exposed to market spikes and fluctuations," Krieger said.
Kelly was even more direct: "I would hope nobody's just thinking about straight market purchase with no hedge at all. That would not seem to make sense."
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