But there’s little doubt this ambitious initiative will be the costliest to consumers of the many energy laws Springfield has enacted over the last 25 years if it reaches the finish line later this week. Unlike some past efforts, which made utilities and their holding companies wealthier but managed at the same time to keep electric bill increases in the low single digits, this one will result in noticeably higher utility costs for average consumers.
By 2024, after expiration of Commonwealth Edison’s formula-rate system, the average household in northern Illinois will pay about $7.75 more per month for electricity just from the bill’s effects—a 9% increase over today, according to Crain’s analysis.
The typical single-family household (average residential usage in ComEd’s territory is skewed lower than other places, due to the large number of apartments) would pay an extra $10.40 per month by 2024. (AARP’s analysis examined the effect on single-family households and looked ahead 10 years. Many of the new annual charges will last 10 years.)
The measure, aimed at eliminating carbon emissions from Illinois’ power production by 2045, looks to achieve that by charging ratepayers more to preserve existing nuclear plants in danger of closing ($140 million a year on average for five years for ComEd customers) and finance more solar and wind power ($275 million a year statewide) while also requiring all coal- and natural gas-fired plants to close over time.
Ratepayers also get charged more for a program to convert existing coal-plant sites downstate to solar fields ($47 million a year statewide) and to finance programs to transition communities and workers dependent on fossil fuel jobs to other industries ($180 million a year statewide).
Already enacted earlier this year is a law that charges each consumer—no matter how much or how little power they consume—a flat fee to pay for increased financial assistance to low-income households. Those fees ratchet up from 48 cents a month in 2022 to 96 cents in 2025, where they cap out.
Ratepayers also will shell out more than they do now for Commonwealth Edison’s energy-efficiency programs. First enacted in the 2016 Future Energy Jobs Act, the efficiency program currently hikes ComEd rates by $50 million a year and is a major profit center for the utility. The bill would increase that by 50% to $75 million.
All those new charges will amount to close to $5 more on the average monthly household electric bill and $6.57 for the typical single-family household.
Where things get more subject to interpretation is what will happen to the ordinary delivery rates ComEd charges. A 2011 law—which ComEd last year admitted to hatching an elaborate bribery scheme to help pass—allowed the utility to change its rates each year via a formula over which state regulators had little say.
Outraged by the bribery admission, Pritzker and many lawmakers vowed to end formula rate-setting. The bill doesn’t do that, but it does allow formula rates to expire after next year, as current law provides.
In their place, ComEd would be allowed to petition the Illinois Commerce Commission for a five-year rate plan encompassing planned capital spending and setting rates accordingly.
ComEd parent Exelon has told investors it expects ComEd’s delivery rate base—the sum of the equipment and investments made over the years with remaining useful lives—to total $15.3 billion in 2024, up from $12 billion last year. If that happens—and if the utility’s returns are allowed to rise from lower formula-era returns to those enjoyed by Nicor Gas and other utilities—ComEd’s revenue would rise an estimated $363 million from now. (The analysis also assumes ComEd’s recoverable costs would rise 1% annually.)
A $363 million rate hike would amount to about $2.77 more per month for the average household and about $3.83 for the typical single-family home.
The Pritzker administration believes it’s unfair to include ComEd’s likely future rate hikes among the bill’s effects. The bill requires the ICC to audit ComEd’s past investments and eliminate those it determines shouldn’t have been made to recalibrate the rate base on which to set future profits. The ICC also would have leeway now to set a new return on equity.
The Pritzker administration also points out that no one can say what would happen if the formula system had been extended.
“There are assumptions here that have no basis in fact,” Pritzker spokeswoman Jordan Abudayyeh says in an email. “We don’t know what the base will be. The audit, followed by the multi-year rate plan, are designed to only spend money on the things that are needed, instead of what formula rates have been. It is a bit reckless to try to decipher what the ICC will do in terms of rate base several years down the road, after getting more information than they have ever had upon which to make grid decisions.”
Keeping ComEd rates from soaring even higher than they might have under the formula will be a challenge for regulators, however. The formula ties ComEd’s profits to long-term interest rates, which have been historically low for years. Freed from the formula, they will rise, even the governor’s staff allows.
To keep rates from soaring will mean saying no to many of the spending plans ComEd will put forward and surely argue are critical to work into the grid all the new renewable projects the bill finances—not to mention enabling electrification of buildings and cars.
To consumer advocates’ dismay, the measure retains some key elements of the discredited formula system, most notably “guaranteed profits,” the right for the utility to charge customers extra in a given year if it didn’t earn what regulators provided for the previous year.
“They literally didn’t have to do anything,” says Abe Scarr, director of consumer advocacy group Illinois PIRG. “Formula rates were sunsetting. . . .We hope (the ICC) steps up and reins the spending in, but we have no reason to think it will.”
While lawmakers struggle to find consensus on the last remaining issue keeping the long-lingering package from reaching the governor’s desk, it was telling that the proposed solution to the problem emerging today from House Democratic leadership would reach for the financing source on which most such things usually rely: ratepayers’ pockets. Pritzker wants the Prairie State coal plant in southern Illinois to reduce carbon emissions substantially before finally being required to close in 24 years. The plant’s supporters object that the facility won’t be able to get financing for such a system.
So lawmakers now are considering adding another $20 million-a-year charge to ratepayers over a decade to give Prairie State $200 million for the effort, in a bid to finally strike consensus, sources say. That news was first reported by Capitol Fax.
via Crain’s Chicago Business
September 8, 2021 at 07:53PM