Integrys Energy Services, a unit of Integrys Energy Group TEG.N of Chicago, won a municipal aggregation contract to supply Chicago with lower cost electricity from non-coal fuel sources through 2015.
The Chicago City Council last week picked Integrys because the company offered the lowest price margin in a two-stage competitive process that included eight companies.
"By buying electricity in bulk, we have secured an agreement that will put money back into the pockets of Chicago families and small businesses while ensuring that our electricity comes from cleaner sources," Mayor Rahm Emanuel said in a statement.
The mayor said Chicagoans will save up to 25 percent a month on their first electricity bills from February to June 2013, representing about $25 in monthly savings for the average household.
Over the life of the agreement that ends in May 2015, Chicagoans will save up to 12 percent on their bills, resulting in a total savings of $130 to $150 for the average household for the entire agreement, the mayor said.
Chicago's municipal aggregation supply agreement is the largest in the nation, the mayor said.
The city said it expects the transition to Integrys to be seamless. The city's power company, Commonwealth Edison (ComEd), will still be responsible for delivering electricity, reading meters, and responding to outages.
ComEd is a unit of Chicago-based Exelon Corp (EXC.N).
ComEd will also continue sending monthly bills and receiving payments, and customers will be able to keep the same budget billing and automatic payment options they have now.
Integrys will be required to always beat or match the ComEd price.
Chicago residential and small commercial customers will be automatically transitioned into the program unless they opt out. They can opt out of the program at any time without charge, fee or penalty.
(Reporting By Scott DiSavino; Editing by Nick Zieminski)