Illinois Attorney General Kwame Raoul’s office recommended a more modest reduction, to $1.1 billion. But CUB Executive Director David Kolata in a statement said he expected his group and the AG to combine forces to push to reduce that $1.5 billion request by more than $1 billion in coming months.
In addition, ICC staff — in the past typically less critical of utility rate recommendations than CUB or the AG — urged that commissioners sharply reduce ComEd’s equity return embedded in its rate proposal to 8.91% from a utility-proposed rate starting at 10.5% in 2024 and climbing 0.05% each year to end at 10.65% in 2027.
For utilities like ComEd, return on equity is a key lever in determining what rates they charge and what net income they generate. The difference between what ComEd wants and what ICC staff proposed would account for about $600 million of revenue alone over the four years, even if all ComEd’s spending proposals were approved.
A host of other business and municipal parties filed testimony on ComEd’s proposal, showing how much is at stake for the region. They included the Chicago Transit Authority, Metra, the city of Chicago, the Building Owners & Managers Association of Chicago and Walmart.
ComEd filed the four-year rate-hike plan in January under the Climate & Equitable Jobs Act, the 2021 law championed by Gov. J.B. Pritzker that aims to eliminate fossil fuels from the state’s power-generation industry by 2045.
If approved as proposed, the average household would pay $17 more per month just for delivery of electricity by 2027.
ComEd has argued that the sharply higher rates are necessary to finance added infrastructure to make the grid more reliable and secure and to connect more renewable power sources called for in CEJA.
ICC commissioners have until December to rule on the sprawling proposal. That caused the AG’s office in its testimony to propose a more careful look in the future at multi-year rate plans like ComEd’s.
“In our opinion, CEJA is well-intended and forward-looking, but presents challenges to staff and stakeholders and imposes enlarged responsibility on the commission due to the lack of structural incentives to constrain capital spending,” AG witnesses Paul Alvarez and Dennis Stephens wrote in their testimony. “As a result, we urge the commission to take the steps necessary to restore the balance between shareholder interests and customer (and state economy) interests that the traditional ratemaking construct offered by closely reviewing the company’s grid plan, and adopting our recommendations to limit grid spending to a reasonable level, and to require a consensus building process prior to the filing of the next grid plan.”
The AG recommended putting off hundreds of millions of dollars in projects ComEd proposed to pursue over the next four years.
Likewise, ICC staff was implicitly critical of ComEd’s request for a return exceeding 10% when it bears so little financial risk under the rate-setting system CEJA established. ComEd has said utilities in other states get returns above 10%.
Staff testified that ComEd, unlike many utilities in other states, is allowed to charge ratepayers more in a given year for unanticipated costs or revenue shortages experienced in a previous year.
“In a traditional rate case, nothing guarantees the actual rate of return will be earned; a company’s actual return could be more or less than the commission-authorized rate, depending upon how the utility’s actual expenses, investments and revenues compare to the expenses, investments and revenues reflected in the commission-authorized revenue requirement during each year until the conclusion of the utility’s next rate,” ICC staff analyst Michael McNally wrote. “The (system) was, and is, less risky for ComEd than a traditional rate case.”
The commission’s makeup has changed significantly over the past several months to become more sympathetic to consumer interests and less to utilities’. Doug Scott, a former ICC chairman under Gov. Pat Quinn and a key adviser to Pritzker on energy issues, will take over as ICC chairman next month.
The commission has the unenviable task of keeping electric bills from soaring while also enabling enough utility investment to keep Pritzker’s green transition on track.
Also at stake is Illinois’ status as a reasonably priced source of electricity for power-intensive businesses like manufacturing. Costs are rising, largely due to years of policies charging ratepayers extra for initiatives ranging from bailouts to keep nuclear plants open to state-overseen contracts to develop new wind farms and solar fields.
Looming over the proceedings, too, are the recent guilty verdicts for the so-called “ComEd Four,” accused of conspiring to bribe former House Speaker Michael Madigan for state laws over much of the decade beginning in 2011 that were worth billions to ComEd and parent Exelon.
ComEd CEO Gil Quiniones, the rare outsider hired to run the Chicago utility, has strived to reassure the public that the corruption enveloping the company over the last decade is a thing of the past.
But a byproduct of ComEd’s criminal behavior — the utility admitted to bribery in 2020 in a deferred-prosecution agreement with the U.S. Attorney’s office in Chicago — is that, unlike in past times, it’s at the sole mercy of its regulators. In past years, ComEd would muscle legislation through Springfield when it didn’t like how the ICC was treating it.
That option is politically unfeasible now.
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May 23, 2023 at 05:52PM