*** UPDATE - 2:28 pm *** Rep. Art Turner just announced that the House will vote on the electric rate bill on Thursday. The bill isn’t even drafted yet. Committee hearing tomorrow.
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* Phil Kadner takes a close look at the electric rate deal and likes most of what he sees. Here’s one example…
The attorney general insisted on the creation of a new government body, the Illinois Power Agency, which will negotiate the price of electricity in the future with generating companies.
This agency also will have the authority to create state-owned power plants in the future. The reverse auction, which occurred last year and created the huge spike in electric rates, is dead. Instead, the Illinois Power Agency would have the ability to solicit sealed bids for power and then negotiate for an even lower price than the lowest bid if it chooses, according to Lisa Madigan’s office.
“What this means is that ComEd would no longer be accepting bids from its parent company, Exelon, to purchase power, which I think is a very good idea,” Scully said.
Will the Illinois Power Agency have greater credibility than the Illinois Commerce Commission, which regulates the electric utility industry? The attorney general’s office claims that conflict-of-interest measures and other oversights built into the legislation will make it less likely that the power authority would be compromised. In addition, its scope will be limited to soliciting bids for electricity and operating power plants.
* The Daily Herald has some legislative reaction, pro and con…
For many lawmakers, however, this proposal was the first sign of progress in months for what has been a contentious issue.
“I’m extremely pleased that we were able to provide assistance and actually a long-term plan for purchasing electricity, hopefully at a lower, more reasonable rate. I think this is good news for every customer in Illinois,” said state Sen. Susan Garrett, a Lake Forest Democrat.
But many lawmakers remain wary of any power deal until its on their desks ready for a vote.
State Sen. John Millner, a Carol Stream Republican, questioned if ComEd wasn’t paying too much toward a pool of money that’s ultimately go to downstate Ameren customers.
Actually, that money is coming from Exelon, and Chicago-area legislators now have something they can hold over their Downstate colleagues (think mass transit).
* More from the Daily Herald…
However, if this deal holds, it could clear the way for resolution of numerous other issues, most notably the state budget, which remains stalled. A temporary budget approved last month to keep the state open expires at the end of this month. If there’s not another short-term budget, or a full year budget by then, it would threaten state support of local schools in addition to shuttering state offices and parks.
Downstate lawmakers previously held up other budget plans, saying they’d block any such spending until action was taken on electric rates. One of the leading downstate Democrats on the issue said Monday that he’d not relent until the House and Senate had approved a power bill relief plan.
* Consumers remain skeptical…
Like other consumers interviewed by the Sun-Times, Chicago retiree Sheldon Landy was skeptical the deal provided enough relief.
The former railroad executive, who is 76, also said he was soured by Jones’ insistence that consumers should not be granted a rate freeze because of its ramifications on ComEd’s bottom line.
“His constituents probably can ill afford any kind of increase, and yet his main concern throughout all of this was ComEd going bankrupt. That was pure nonsense,” Landy said. “If Commonwealth Edison and their counterpart Downstate were willing to give up $1 billion, that’s just a start.”
* But there was a different mood in New York…
Shares of ComEd’s parent company, Exelon Corp., rose by almost 2 percent Monday, closing at $80.37.
* The bill hasn’t been filed yet, but when it does, it will probably be attached to this piece of legislation.
* More rate stories, compiled by Paul…
* Rate relief deal could help end budget impasse
* Rate relief package outlined, Madigan & Jones predict passage
* Utility rate relief: refunds, rate cuts, reform
* Democrat’s power bill could roll back 45% of rate increase
* Leaders pull off $1 billion rate deal
* Rate relief a reasonable outcome
Thoughts?
- Ghost - Tuesday, Jul 24, 07 @ 9:50 am:
It becomes more clear everyday why I want Lisa madigan as Governor.
- So Ill - Tuesday, Jul 24, 07 @ 9:52 am:
This is great news. And to think, some lawmakers wanted to settle for $64 million in relief….
- Paul Revere - Tuesday, Jul 24, 07 @ 9:57 am:
The rate relief portion is fine. But here we go again completely remaking how electricity is regulated in Illinois with almost no analysis to this solution or public comment. Instead, the skids are greased with $1 billion in rate relief hoping nobody notices the untested new bureaucracy that we have no reason to believe will do any better job than the multi-letter agency it replaces.
The average time to build a new base load power plant is 7-10 years. Illinois hasn’t built new base load in almost 20 years. This legislation almost guarantees further reliance on expensive natural gas plants.
The market gets it which is why the stock is up. This will not help Illinois ratepayers in the long run. In fact, a little noticed article in Crain’s yesterday talked about how the regional electic distribution entity just imposed a huge rate increase which will be paid for by every rate payer here. In short, even with this “deal” rates are going up big time for as far as the eye can see.
Cmon media. Stop looking at the shiny thing ($1 billion) Madigan wants you to look at and look at the larger picture. It ain’t pretty…
- Warren - Tuesday, Jul 24, 07 @ 10:00 am:
Why do we need the Illinois Commerce Commission? Iif the General Assembly doesn’t like a position, they’ll pass legisltion that supercedes a commission order. Now a new Illinois Power Agency will be created. If the general assembly won’t let the ICC regulate, maybe the ICC should be abolished.
- Esteban - Tuesday, Jul 24, 07 @ 10:03 am:
Some good stuff, some not so good. Senator
Emil Jones (D-ComEd) earned his campaign
contributions from the company.
- Belle - Tuesday, Jul 24, 07 @ 10:08 am:
A short sighted fix for election 2008. Rebates as relief? Ameren/ComEd gets the money/credits right back on heat bills. And then what are people going to do? Single parents, retired on fixed incomes? It’s not like we can shop for a better deal now is it?
- Logical - Tuesday, Jul 24, 07 @ 10:14 am:
Revere is absolutely right about power plants. Without any assurances about providing power to their own customers, there will be no reason for Ameren to upgrade or pursue additional generating capacities and/or facilities. Just as the last time the politicians were involved (1997), this decision will haunt all consumers in future years. While cheap electrictiy is nice, the politicians need to insure that we can generate are own power (remember California).
- Captain America - Tuesday, Jul 24, 07 @ 10:27 am:
I heard a report on the radio last night that Exelon gets to spin-off/completely separate from Com-Ed after three years. This separation of an extremely profitable holding company from a step-child subsidiary is probably the key to this deal from the utility company standpoint.
Personally, i’d like to return to a modernized public utility model for util;ty companies because power generation and distribution seem to be a natural monopoly. Competition is a myth and deregulation of this industry has been an ideological fraud. I don’t lke the artificial separaation of power generation and distribution.
The auction system was undobtedly a rigged process skewed to screw consumers.So presumably, the new Power Authority will be an improvement on the auction system. It’s alll very complicated, adn the devil is alwasys in the details. Remember Enron in California. It can happen here!
Despite my reservations, I am pleased that the rate relief package has been successfully negotiated. Lisa Madigan is the best Attorney General that we have ever had in terms of being a genuine “people’s advocate”. I imagine Rod was grinding his teeth about Lisa’s “fly-around” with Senator Jones and Speaker Madigan.
As I’ve mentioned before, I have never been able to understand why the Governor has not been totally involved in the electricity rate issue from the beginning, given that it was a bread and butter issue for working people he professes to represent. It seems like a missed political opportunity for the Governor to score some much-needed political points.
- So Ill - Tuesday, Jul 24, 07 @ 10:40 am:
Except, Capt., there was no easy fix, nothing he could trumpet as THE solution. It took 7 months, more, of what can fairly be called hard work to get this compromise.
Not much of a press pop there, huh? Plus he’d have to stick with it the whole time. And answer questions.
- Mr Brown - Tuesday, Jul 24, 07 @ 10:43 am:
This is a bad deal if you really look at it… But unfortunately most consumers will read the headlines or see that Madigan and Lisa fought for a rebate and got it. Too bad the rebate is a sham and sounds better than it really is. It disgusts me that they would tour the state acting like they did something meaningful when in reality this is as bad a deal as it ever was… Someone should really look at the details.
- So Ill - Tuesday, Jul 24, 07 @ 10:56 am:
Like what, Mr Brown? Give some background here, instead of just making sweeping allegations.
Revere, above, is likely right. I tend to take a more sympathetic view to the situation, but I understand his concerns.
What are yours?
- Rich Miller - Tuesday, Jul 24, 07 @ 10:58 am:
“Mr. Brown,” instead of saying “somebody should look at the details” (which is something that a lot of commenters have been using) why not explain some of those elusive details and tell us exactly why you think this is such a horrible deal? Thanks.
- Paul Revere - Tuesday, Jul 24, 07 @ 11:05 am:
Rich,
I explained a lot of that already. This is a bad deal because it provides no incentive for the construction of new base load plants. It simply says the IPA will somehow magically hold down the market. In the meantime, what yesterday’s Crain’s article pointed out is that the market is much bigger than the Madigans can control. This IPA is a huge friggin deal that nobody is analyzing in the press. It’s not enough to just say “well Michael and Lisa Madigan say this will work so it will work.” You’ll recall we tried that ten years ago with the reverse auction. Where was Madigan then?
For the record, I think Lisa Madigan is great and hope she’s the next governor. But on this, she’s being misled into a bad big government solution.
- Captain America - Tuesday, Jul 24, 07 @ 12:01 pm:
Paul Revere,
Thanks for the tip on the Crain’s article - I’ll be sure to read it. You obviously know more about this issue than the rest of us.
I have no doubt that the utilities achieved their major objectives during these negotiations, and that the short-term sacrifice in terms of rebates are far out-weighed by the long-term gains for Exelon and Amren(Sp?).
Politically we had to have rebates to soothe the savage consumer/voter. Given the many complciations, this setttlement and the creation of a power authortiy are necessary, but probably not sufficient. Although many of ourleaders have acted in good faith, it’s highly likely they were taken to the cleaners.
There is a famous phrase in the public administration/political science literature called the “politics of muddling through” given complexity, uncertainty, and incomplete information. Illinois and other states will have to “muddle through” this situation as best we can and learn/make adjustments along the way.
The original sin/mistake was to deregulate in the first place in exchange for the 10 year electricity rate freeze. It proabably looked like a good deal for consumers at the time. The problem now is how best to put the genie of deregulation back into the bottle. Perhaps it can’t be done.
- cermak_rd - Tuesday, Jul 24, 07 @ 12:11 pm:
I like the fact that the state can create state-owned power plants. Nothing will make the power companies sit up and take notice like the credible threat of the state competing with them. Nuclear power plants are cheaper to build now then they once were and the build process is more streamlined than it once was leading to quicker build times. A managing firm could be hired to run the thing and profits from the power plants could go into a power plant building fund.
- Anon - Tuesday, Jul 24, 07 @ 12:15 pm:
The reason this is a good deal is that the alternative, the rate freeze, would have failed in court. When it failed in court, it would have left the AG and the Speaker in an overt position of weakness as opposed to the relative position of strength they enjoyed during this session. Getting a billion in rate relief from companies that have no legal obligation to give ratepayers anything is a remarkable acheivement.
The foremost problem with the IPA is not that it can’t build a baseload power plant, it can. The problem is that that plant can’t sell it’s output to anyone other than co-ops, munis and aggregated munis. At this time, co-ops and munis in IL represent only 3% of the load in the state. Also, those entities have long term contracts with existing or planned power plants that lock them in for decades. The Prarie State power plant obligates the Illinois Municipal Utility Agency to purchase it’s output for the next 30 years. It’s hard to see where the demand for the IPA-built/owned power plants is going to come from when so much of that load is already locked into contracts.
- Paul Revere - Tuesday, Jul 24, 07 @ 1:09 pm:
Anon is EXACTLY right. Even if the state has the right and bonding authority to build its own plants, and even if we think its a good idea for the state to be in the business of owning and operating power plants, there is nobody to buy their power under this deal.
- Bill - Tuesday, Jul 24, 07 @ 1:12 pm:
With all of the whining and moaning about $800 utility bills earlier in the session, why does the public embrace this plan which “limits” increases to 40% in the out years and results in rebates of something like $20/per month per home on average. I mean if this plan satisfies downstaters, fine, but I think it is a big win for the utilities. It is time to adjust my portfolio.
- electric boogaloo - Tuesday, Jul 24, 07 @ 1:13 pm:
1. Creating a new government agency frightens me, without knowing who will be on it. What industry is truly better served when you throw more government at it? The ICC has traditionally been stacked with utility sympathizers, or politicians; what will make the IPA different? 2. How can government expect to obtain below market rates? The market is the market, and it is not reasonable to expect to obtain below market rates for consumers. 3. The competitive declaration should be provided to all consumers, instead of this hybrid regulation competitive market model. Over-protectionism of residentials biases the market, so either let the market control, or go back to regulation. Trying to do both creates chaos. 5. Much more focus should be provided to the retail market; everyone keys on the wholesale market, and the retail market suffers through horrible billing and metering systems of utilities. Also, residential customers are over-protected because the entities that represent them are self-interested – CUB and the AG – want to keep their respective jobs and pretend like they are doing God’s work, when they are really making Illinois an embarrassment from an electric dereg viewpoint. 6. The refunds are a joke, and too much money/electric restructuring was left on the table. Take a look at the utility stock prices today. This is what happens when you don’t bring with you significant expertise to the table. I predict disaster. What has been accomplished is a transfer of blame when high prices hit – it will be the State’s fault, not the utilities.
- Logical - Tuesday, Jul 24, 07 @ 1:40 pm:
Just what this state needs another government run “family” business. No wait! Not just a business but a nuclear generating plant. When they announce the total cost, I hope there is a 50% addition to cover all of the change orders. Then we will be lucking enough that it will be ran in such a way as to benefit all of the political connected people of the state. Let’s see, Jones family and everything they are involved with, of coarse the Chicago machine will have some pull, the Governor, and all of the other recently named connected people. If the state becomes involved in generating power, we (taxpayer) might as well dig a deep hole and just dump cash into it!
- "Fed-Up" - Tuesday, Jul 24, 07 @ 1:40 pm:
Well they (the legislators) did it again…and like good little sheep we will follow right along. They return up to 45% to the consumers in rebate checks and then the remaining 55% goes towards their profits as well as “small” increases the next few years. I’m afraid that once again the jokes on us folks.
- So Ill - Tuesday, Jul 24, 07 @ 1:43 pm:
Bill, things might have been a lot different if the Governor had gotten involved.
He didn’t help one bit, and while there are some who will say that’s a good thing (har-dee-har) I disagree. This was more important than video games, than prescription drugs, than any of them…and he should have been there.
He wasn’t, and so there was just so much pressure on the utilities, and this is the best that could be done.
In short, I think it’s hypocritical of someone who supports the Governor as much as you do to attack the final deal.
- So Ill - Tuesday, Jul 24, 07 @ 1:50 pm:
Electric, to a couple of your points:
It’s not BELOW market rates they’re going after, it’s MARKET rates they’re going after. The Ameren and Com Ed rates as charged right now were arrived at by a flawed process that led to inflated rates. The goal is to get back to average. Anyone who says that electricity should cost the same today as it did ten years ago is nuts — but the increase should not have been as high as it was.
The pols can talk up the role of the public all they want, and I have no doubt that the pressure certainly had a lot to do with the final agreement. But I think the Attorney General’s pending case had much more to do with it, specifically on the All-Electric discount for Ameren customers and potential collusion between ’separate’ entities (say, Am-Gen and Ameren or Com-Ed and Exelon). I think that got them to the table.
- electric boogaloo - Tuesday, Jul 24, 07 @ 2:23 pm:
So Ill, I agree with your point as it applies downstate somewhat. But for ComEd, recall that the residentials received a 20% discount for agreeing to this mess to begin with in ‘97 (actually 15% in ‘97, and 5% ~ ‘00 when Unicom divested its fossil plants at 5 times book value, and the legislature allowed the utility to keep the profits instead of refunding to consumers because they over-earned — again through Madigan (and with more budget to CUB)). So the 24% rate increase in ComEd is actually 4% over 1997 — not even keeping pace with inflation, and actually in line with the forward pricing curves. Its the non-residential market exposure that has seen the real increases — and which definitively showed why the auction was a joke. Downstate, Ameren just mis-managed the whole dereg process from my perspective.
- So Ill - Tuesday, Jul 24, 07 @ 2:38 pm:
Agree with you there, electric b. Ameren screwed the whole thing up. If they don’t eliminate the all-electric discount — which Com Ed didn’t — we’re not in this mess at all. I’m not sure people would have complained at all.
By the way, I heard from a reliable source yesterday that when Ameren eliminated the AED, it didn’t even tell its lobbyists in Springfield. That’s stupid on I can’t tell you how many levels.
- Team Sleep - Tuesday, Jul 24, 07 @ 2:46 pm:
Ameren should have NEVER been allowed to purchase UE, IP and CIPS. What a joke.
In this instance, Emil did as little as possible to help those who need it the most: the poor and the elderly. Yet ComEd and Ameren will continue to run roughshod over consumers. A rate cut will eventually catch up with fixed-income seniors and single mothers who do not always receive adequate COLAs. The ICC and the Senate will pick away at these agreements, and “buying power” will prove more problematic than expected. And, of course, we have to have another government agency. I wonder who will run the IPA?!
And this should not be the same argument/debate as we all have been engaged in over oil consumption. An elderly couple should not have to choose between eating and paying a utility bill. Drivers can choose to limit trips, and commuters in larger areas such as the Metro East and Chicago can use public transportation. People cannot always utilize electric co-ops because of service area restrictions and power grids.
- Team Sleep - Tuesday, Jul 24, 07 @ 2:48 pm:
And I must say that Ameren should be prosecuted or at least publicly (read: financially) rebuked for the all-electric BS. It was basically a legal scam and it should provide a nice piece or raw meat for Lisa and her prosecutors.
- cermak_rd - Tuesday, Jul 24, 07 @ 3:18 pm:
Team sleep,
People may not be able to change providers, but they can use less energy. They can turn the thermostat way up in the summer time and wear light clothes. They can turn lights off when not in use and switch to compact flourescent bulbs. When their appliances need replacing, they can choose the most energy efficient model. They can turn the TV, video game etc. off and go outside to recreate.
- Team Sleep - Tuesday, Jul 24, 07 @ 4:34 pm:
Cermak, can seniors and little children (and not to mention pets) handle the hot and the cold? It’s an essential service, and I’m not going to tell my grandparents that they need to be utility conscious at age 84.
- Paul Revere - Tuesday, Jul 24, 07 @ 7:34 pm:
I understand the hurry for rate relief, but why is moving this thing at lightning speed more important than ensuring we have time to review it and get it right. This is precisely the kind of process likely to result in yet another messed up solution.
- Anonymous - Tuesday, Jul 24, 07 @ 9:02 pm:
ComEd also dropped their all electric discount, as my electric bill skyrocketed this past winter far more (over 50%) than the 25% increase publicized.
After the massive bill from that three week brutal cold spell that nearly froze the pipes, my thermostat was reset at 50 degrees to keep the bill down…not pleasant. Spent a lot of time wrapped in blankets thinking about how to insulate better.
ComEd and Ameren came to the table because legal and legislative threats had dropped their bond ratings to junk status.
The Governor didn’t get involved because he wants to spend the extra sales tax revenue from higher electric bills.
Interesting the deal is being made now, just before the big AC bills start rolling in and impacting a lot more people statewide. Wonder if we’ll be talking about rebates again for the fall veto session?
Conservation and energy efficiency programs are far cheaper ways to meet increasing demand than building new power plants…just not as profitable for the power companies.
In other states, bidding/competing for state contracts to run energy efficiency/conservation programs has been the most cost effective way to cut demand and least subject to political whims. Often non-profits win because they actually care and get good results, unlike most (not all) utility programs.