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Electricity legislation sparks debate

by Kate Springer
April 14, 2011

Everyone can agree on one thing: Illinois needs to update its energy grid. But the Energy Modernization Act, also known as House Bill 14, would allow  $2.6 billion worth of upgrades. It sounds like a good thing but the proposal is meeting resounding opposition from critics.

The AARP, Citizens Utility Board and Illinois Attorney General Lisa Madigan have dubbed HB 14 a “Trojan horse” or ComEd’s “automatic rate-hike bill” in an effort to fight the legislation.

During the past three months, Commonwealth Edison Co. and Ameren Corp., a downstate utility, have been lobbying legislators to pass HB14, which would allow them to invest in “smart meters” and infrastructure upgrades over the next 10 years in return for an alternative way to set rates.

In the current system, ComEd must spend about 11 months in hearings to convince the Illinois Commerce Commission that it needs a rate increase based on wholesale electricity prices.

Most recently, ComEd petitioned the ICC for a $396-million rate hike. Ten months after its request on April 13, an ICC judge recommended a $166-million increase, or a hike of 3 percent, on the average monthly bill. That was only half of ComEd’s request. The official adjustment will be decided by the end of May.

It’s a familiar pattern and one that ComEd would prefer to avoid.

If HB 14 passes, the ICC would still evaluate ComEd’s rate increases annually, but the review would take place during a span of eight-and-a-half months after the rate-adjustment, instead of 11 months beforehand.

“Rates can increase or decrease under this proposal,” said Krissy Posey, a ComEd spokeswoman. “However, nothing will happen without ICC approval, which means that changes in rates are not automatic.”

The former head of the ICC, Dan Miller, said that if utilities such as ComEd are not able to raise rates to offset their infrastructure investments, then electricity generation could be compromised.

“I want our utilities to be as solid as they can possibly be,” said Miller. “If we can’t guarantee to power and protect our business, it doesn’t matter how low our taxes are, businesses won’t come to Illinois.”

But critics argue that the plan would increase the typical bill by $3 a month, or $36 a year, as well as enable the energy giant to circumvent century-old regulation procedures by applying its own formula to adjust rates.

Jim Chilsen, spokesman for the Citizens Utility Board, said the ICC recommendation to cut ComEd’s rate-hike request in half is a sign that ComEd does not need a $326 million rate increase.

“We have argued that ComEd doesn’t deserve any increase and should in fact be giving consumers a $40-million rate cut,” said Chilsen.

According to CUB, the bill would allow every utility in the state to get yearly automatic rate-hikes.

Dimitris Kapsis, vice president of American Utility Management, agreed. Kapsis’ firm works with utilities to reduce expenses.

“Once they get that passed, and the formula is in place, I can guarantee you won’t be seeing rates dropping anytime soon,” said Kapsis.

As the bill comes closer to a vote, the Citizens Utility Board has been working overtime to educate consumers about its potential effects. Despite CUB’s efforts, many consumers are unaware of the bill.

Chicago-resident Tiffany Jones said she already pays more than $100 a month in estimated electricity costs and is concerned about potential rate increases.

“It’s ridiculous to raise prices again,” said Jones, an expectant mother. “Adding $3 a month doesn’t seem like much, but when you figure that into all our other expenses — rent, gas, car, insurance —it’s a bigger deal.”

But ComEd’s plan has as much support as opposition.

G&W Electric Co., a manufacturer of switchgear and cable products used by utilities, said in testimony that the legislation would directly enhance the productivity of the manufacturing industry.

Travis Miller, a Morningstar Inc. analyst, said smart meters are a good idea, and he noted that his Oak Park neighborhood already has them..

“Yes, it may increase rates to install the smart meter,” said Miller, “but you can lower energy cost now that you know what you are paying.”

Prunao Pateo, a 7-Eleven Inc. convenience store manager and Chicago resident, agreed.

“I’d be willing to pay more money a month if I could see my exact bill because it will save me money in the future,” said Pateo.

ComEd said although the monthly rates would increase, consumers would have more ways to trim energy usage and businesses would see growth.

“Customers benefit from improved reliability, a smart meter in their home which empowers them to make smart energy decisions and save money, thousands of Illinois jobs and millions in Illinois tax revenues,” said Posey. She estimated that consumers would save $2 a month by the end of the investment period.

But smaller manufacturers fear the legislation may have an adverse effect on operating expenses.

“If they raise the fee for the wires our bill would go up substantially,” said Dennis Carlson, treasurer of Laystrom Manufacturing Co. in Chicago. “We are a manufacturing company that is heavily using electricity for our machinery, but if our costs increase, we can’t pass those costs along to our consumers. They want our prices to decrease.”

While businesses are at odds over the potential costs and benefits, the Illinois Manufacturing Association remains neutral.

“Energy costs are the highest of any business,” said Mark Denzler, the vice president of the IMA. “We understand the need to reform the process commission so that utilities can invest in their infrastructure to ensure that we have a good source of energy. But we also want to make sure that the protections built in would be reasonable and prudent.”

Across the United States, 44 other states have passed similar legislation.

“For many, Illinois has been the least constructive for utilities in the country,” said Miller of Morningstar. “At the end of the day, the regulatory decision incentivizes utilities to invest in the infrastructure, give customers more options, keep the lights on during storms and build more efficient grids.”

The House Public Utilities Committee has until the end of May to decide, according to a staff representative of Rep. Tom Holbrook, the bill’s primary sponsor.