Is the ICC ready for its close-up?

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Based on ComEd’s own projections for historically high capital spending over the next four years and how that will sharply inflate the assets on which it earns a return, ratepayers can expect a roughly $250 million delivery rate hike effective in 2023, nearly $90 million more the following year and another $55 million or so in 2024. ComEd already has filed for a $51 million increase to go into effect next year, over which the ICC will have little say. After combining all those hikes, the average household bill would increase another $4 to $5, bringing the total to about $10. The current average monthly bill is about $83, so that would be a 12 percent spike.

Keep in mind that in ComEd’s territory, dominated by Chicago and its large number of apartment renters and condo owners, an average residential customer uses just 600 kilowatt-hours a month. Residents in single-family homes typically consume more like 900 kilowatt-hours on average, so monthly increases would be correspondingly more.

To put the $250 million projected increase in context, during the formula-rate era, that is a bigger increase than in all but one year—2014, when ComEd’s rates soared $340 million.

The reasons for this are somewhat convoluted, but they boil down to an increased return on equity and the much higher rate base that ComEd has forecast. One of the unexpected benefits of the formula rate was that ComEd’s returns were lower than most utilities’ because they were based on long-term interest rates, which have been and remain extraordinarily low. That benefit disappears with the formula’s demise.

The Pritzker administration promises reinforcements. "The ICC will have more information and personnel than it’s had in decades, if ever," Deputy Gov. Christian Mitchell says in an interview. "The ICC will have more responsibility than it’s ever had. But they’ll also have more tools than they’ve ever had."

What will help is a thorough audit required in the bill of what ComEd has spent under the formula and the benefits of the investments, he says. In the past, utilities have used control over information to win substantial rate hikes from regulators with little pushback. Mitchell hopes to end that dynamic.

The ICC has yet to lay out how many more people it will need. "The ICC stands ready to implement and enforce provisions of a comprehensive energy package once enacted by the legislature and signed into law by Governor J.B. Pritzker," a spokeswoman says in an email. "We believe a reinvestment of resources will enable the commission to live up to its mission of ensuring that customers receive safe, reliable and affordable utility services."

ComEd declines to comment on Crain’s rate projections, saying it can’t provide such an estimate "until a final version of the energy bill is introduced."

But it does emphasize the benefit households will see from the decline beginning in June 2022 in payments to power generators in return for their promise to deliver during high-demand days of the year. The reduction in what residents pay for "capacity," a charge that varies annually and is embedded in their energy cost, will save the average household nearly $11 a month, a spokeswoman says in an email.

"These savings would more than cover the costs of the various provisions in different legislative drafts," she says.

Of course, that cost is set only for a single year, beginning in June 2022 and ending May 2023. Future capacity costs may well be higher. For the current year, they’re nearly three times more. The surcharges and rate hikes the energy bill would authorize would last years.

In addition, because households place more of a burden on the grid during peak-demand times than businesses, they pay more as a percentage of their usage than does the commercial sector for these power-plant guarantees. So businesses won’t be seeing the same level of benefit from next year’s reduction, but they will be seeing the same level of cost increase from the bill, if not more. Business groups have estimated the bill will raise their members’ rates by 8 to 15 percent depending on the industry.

via Crain’s Chicago Business

June 25, 2021 at 09:05PM

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