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Health & Fitness

Mike Donahue: Is ComEd Plan a Sound Investment or Consumer Rip-Off?

The Energy Infrastructure Modernization Act deserves our support and a much better assessment that it has gotten from the consumer watchdog groups so far.

Raise your hands if you like Commonwealth Edison. No one? OK. Raise your hands if you like consumer protection organizations like CUB, AARP or the Illinois Attorney General’s Office. OK. You can put your hands down now.

I realize that it is not popular to support any proposal from ComEd that would increase the electric bill, but the Energy Infrastructure Modernization Act before the Illinois legislature (HB14) deserves our support and a much better assessment that it has gotten from the consumer watchdog groups so far.

First, I should disclose that I am in the electric power development business. I own a company that develops utility-scale wind farms in Illinois and elsewhere. But I don't care much for ComEd, either, because they don’t like wind power; and, as a practical matter, none of the infrastructure improvements outlined in HB14 would benefit my company. But I do understand the critical need to improve our electric transmission infrastructure not only in Illinois but also across the country.

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Here is ComEd’s two-part proposal in a nutshell. Part 1: Charge customers an additional $3 a month for 10 years so it can invest $2.6 billion to improve its transmission infrastructure and install smart meters in customers’ homes and businesses. Part 2: Amend the Illinois Commerce Commission’s ratemaking process to make it more predictable and transparent.

Most people on both sides of the issue see the benefits of Part 1. An upgraded and modernized electric transmission system that spurs economic development, creates jobs, and ultimately saves consumers money (via smart meters) is a big bang for small bucks. It's a privately funded stimulus plan with a user-fee means of repayment.  If only government could finance capital plans as responsibly.

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But it's Part 2 that seems to have people suspicious of the big bad wolf. ComEd would like to charge customers $3 more per month and have a modicum of faith that the ICC will not repeal it while they’re in the middle of a $2.6 billion capital program.

But the watchdogs have labeled HB14 ComEd's "automatic rate-hike bill" and imply that the utility will use the new ratemaking process to raise rates indiscriminately, profit wildly, and allow no government oversight on behalf of consumers. This is an unfortunate misrepresentation of what is really being proposed.

The proposed ratemaking process in HB14 is not new.  The Federal Energy Regulatory Commission and 50 utilities use it across the country.  It requires ComEd to file an annual report to the ICC detailing with extreme specificity its progress and costs and the ICC has the authority to initiate public hearings to adjudicate ComEd’s performance and expenditures.

If the ICC determines at any time that the utility is not carrying out the investment program in a prudent and reasonable manner it can essentially revoke the new rate process and go back to setting rates the old arcane way.  So if ComEd wants to retain the benefit of predictability in the ratemaking process, they will have no choice but to play fair.

CUB also opposes the bill on the basis that the new rate formula would “guarantee” the company a profit. Aside from the fact that profit motive is considered a good thing in our system of capitalism, HB14 requires transparent accountability of every iota of ComEd’s costs including its cost of equity, which effectively limits the company to modest rates of return on investment.  But profits are not guaranteed when the ICC retains the ability to pull the plug on the new rate structure at any time.

There are plenty of checks and balances built into the proposed ratemaking formula to protect consumers.  HB14 presents a responsible path forward for utilities to make long-term capital investments in Illinois’ economic future.  These investments will create positive returns for us all with more economic opportunity and jobs, improved energy efficiency and lower utility bills, and ultimately lower taxes.

So while it remains unpopular to support any ComEd rate hike, we should all raise our hands for this one.  

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