* The reaction to the electric rate deal is pretty interesting. The deal provides substantial relief this year to people, but only as a percentage of their bills. Some see the lowball dollar figures bandied about by Republicans and others and believe they’re getting the shaft…
“I think there’s some concerns about it,” House GOP Leader Tom Cross of Oswego said Tuesday. “In some areas, we’re talking about (relief worth) $7 a month. I think people are expecting these great big relief packages, and I don’t think they’re going to happen.”
“It sounds like a lot of money,” he added. “But when you break it down, it’s not that much money.”
* All the hype in the media about the rate hikes helped fuel expectations of big dollar rebates. But, in reality, ComEd’s increases weren’t all that spectacular…
But typical ComEd customers saw their power bills increase roughly $15 a month, company officials said. The latest deal would provide $7 monthly credits and customers would get a lump-sum credit of nearly $50 on their September bills to cover January through July.
* It all depends how you look at it. A 50 percent or more reduction in the increase sounds like a lot of cash, and it’s complicated for the mathematically challenged who think this means a 50 percent reduction in their actual rates. This goes to show that people don’t really know how much they’re paying every month…
The result, Ameren Illinois President Scott Cisel said Tuesday, will be electric bills this year that for most customers are higher than last year’s by 10 percent to 30 percent — but are below the 40 percent or 50 percent hike or more that was common in recent months.
* The push for a rate freeze, particularly Downstate, probably raised expectations way too high. And since coverage always follows conflict, the greatest nay-sayers are the ones who will get the most press…
State Rep. Bill Black (R-Danville) mocked the relief package, which was crafted by Democrats.
“This isn’t any rate reduction. This isn’t any solid money in their pocket,” Black said.
* And here’s something else that the press isn’t covering. Since the new bill does away with the disastrous and stupid reverse power auction crafted by the goofs at the ICC, consumers will be spared from yet another huge rate hike next year, when the second reverse auction was scheduled to take place.
* All that being said, there are still legit concerns about this proposal, the biggest being that eventually the rates start going back up again and the relief lasts just four years. After that, everybody will be paying what they were paying up until now, unless this Illinois Power Authority can negotiate better rates. I think it might be able to do that, considering how skewed the reverse auction turned out to be. For proof of how bad the auction was, consider that the utilities and Exelon are giving back a billion dollars to the consumers. They had to be pretty flush with cash to afford something like that. Everybody on that Commerce Commisson who voted for the auction should resign in disgrace.
* More details…
— The average Ameren customer, who has seen an annual increase of $250 total on electric bills in 2007, will get refunds this year totaling $130.
— A typical Ameren electric-heat customer, who has seen an annual increase of $750 on electric bills in 2007, will get refunds this year totaling $400.
— About three-fourths of the dollar amount of those refunds will come in lump sums by September, to retroactively offset the increases on 2007 monthly bills so far. Ameren will cut checks to customers who are caught up on their bills, and will credit the accounts of those who are 60 days or more late on their bills.
— Remaining rebates for this year — as well as in 2008 and 2009 — will be applied as credits on monthly bills. The future credits will be smaller, with a net result of bills rising by less than 10 percent each year, as the full rate hikes are phased back in.
— The agreement also will set up a new state power agency to oversee the process of how wholesale electricity is bought and priced, a central issue of the controversy this year.
* And finally, much is being made of Exelon’s role in funding the reductions in the rate increases…
Chicago-based utility giant Exelon will pay the overwhelming share of a more than $1 billion rebate plan designed to ensure every household’s power bill goes down this year.
Exelon is the parent company of ComEd but also generates electricity that’s used elsewhere. Under the terms of the deal, Exelon will pony up $747 million and ComEd will contribute $53 million. Downstate energy companies cover the rest.
* But Exelon ain’t exactly hurting…
Exelon Corporation’s second quarter 2007 consolidated earnings prepared in accordance with GAAP were $702 million, or $1.03 per diluted share, compared with earnings of $644 million, or $0.95 per diluted share, in the second quarter of 2006.
- So Ill - Wednesday, Jul 25, 07 @ 9:40 am:
See, the fact that Exelon and ComEd are paying $800M, while Ameren is paying $200M, is the real disgrace here.
One thing I predicted never came true — I thought ComEd would really put Ameren’s feet to the fire. I thought it was very advantageous for ComEd to just say ‘no, we’re not doing any more than ‘X’, and if you don’t pay your share we’ll let them take us both to court.’ Because the evidence indicated that any court ruling would hammer Ameren to a much greater extent than this deal does.
- anonymous - Wednesday, Jul 25, 07 @ 9:53 am:
There is a lot to be skeptical about in this deal, and its a dream that the power authority will actually lower prices over the longer term.
That being said, the contention that had there been another auction this fall it would have lead to another big rate increase is wrong. The rate increases from the first one were the result of the prices in Illinois catching up with the current market. Given current prices in the future’s markets, had the auction happened (assuming of course no Katrina this fall) the prices really wouldn’t have changed much.
- Energy Consumer - Wednesday, Jul 25, 07 @ 9:57 am:
Rich - a couple of points. The crazy auction that everyone hates was not crazy or flawed. It worked as it was desinged to work and brought in prices that were consistent with nationwide market prices at the time. Understandably, consumers and legislators did not like the results but it worked as designed and approved by the ICC and FERC. The auction placed almost all of the market risk for power supply and load management upon the generation companies and there is a price associated with risk and that was reflected in the final price. The current contracts that are replacing 1/3 of the power that would have been procured by the next, now cancelled auction, take most of the risk that was placed on the generation companies in the auction and move it to the utilities and the utilities are going to have to recover that risk in the prices they charge. The end result for the consumer may be somewhat better or may be somewhat worse depending upon the contracts. Going forward the end price for consumers will likely be close to what the auction would have provided anyway. This deal may provide some transition to the marketplace but that is all that it is. The voters were oversold on the idea of a rate freeze that was unlikely to stand up to a legal challenge in any event. Who has seen and reviewed these short term contracts that replace the auction? Are they subject to the same scrutiny as the auction process result or will the GA just be asked to approve them. It seem odd to me that the Exelon, ComEd, and Ameren companies are blamed and accused of all kinds of things and then are asked to write and support a bill and provide contracts between the affiliate and parent company. Were not these the same relationships that were attacked for the past year. This may be a reasonable deal for consumers in the end but in the end the market price will be what it will be and may be no better than the original auction in due time.
- Paul Revere - Wednesday, Jul 25, 07 @ 10:04 am:
Rich,
You’re still missing the bigger picture. Without new base load plants, rate increases are guaranteed to happen and accelerate. It’s simple economics. The more you have to rely on natural gas fired peaker plants (which happens if you don’t have enough baseload for heavy use), the higher your rates and more vulnerable you are to market forces.
Until you deal with that issue, which the IPA absolutely does not, ratepayers will get hosed.
- So Ill - Wednesday, Jul 25, 07 @ 10:29 am:
Paul, I’m not disputing your point. I do want to know this:
Do you honestly believe anything along those lines could have been agreed upon, with this legislature and these power companies? Without the Governor pushing for anything?
Like I said yesterday, I guess I’m more optimistic that something was handled for the short-term, and hopeful that building more plants will be the next step. I think it’s a pipe dream to have expected these negotiations to produce that effort, unfortunately.
- Rich Miller - Wednesday, Jul 25, 07 @ 10:32 am:
If the power companies would do some upgrades, they could deliver a lot more power from the plants to consumers.
- Team Sleep - Wednesday, Jul 25, 07 @ 10:35 am:
Scott Cisel is a jerk. Seeing him in front of the GA in March or whenever it was showed that he had no real plans and was trying to come up with answers on the fly. And this plan is mish-mashed at best. While a $400 refund is nice, the increase will only eclipse the refund in due time.
Reverse auctions are nice - if you are the utility company. For being a “solid blue” state, the agencies and negotiators who deal with the power companies sure are not very pro-consumer. That is a big indictment of the current power structure and leaders.
We are now paying for the shortsidedness of 10 years ago, and the ICC’s anti-consumer actions of allowing Ameren to scoop up all of its major competitors (downstate, at least) is abhorrous. One thing’s for sure, though: Lisa Madigan for Governor in 2010!
- Team Sleep - Wednesday, Jul 25, 07 @ 10:42 am:
So. Ill, remember your post when Ameren decided to pull these smooth moves later on down the road. Remember, when COLAs do not match the amount it actually takes to live after increases in real goods and services take place, this “deal” will not seem too great. Although the nix on a second reverse auction is nice…
- Energy Consumer - Wednesday, Jul 25, 07 @ 10:45 am:
rich - i am not sure which power companies you are talking about but almost all of the baseload power plants in the State are running near full capacity and have already been modified for optimal performance given the age of the plants. Demand is continuing to increase meaning that more and more power will eventually have to come from out of state without new generation here. Look at how hard it is to get a new plant approved and financed. Many of the enviro’s hate nucs, hate low-cost coal plants, and only like renewables. Renewables have a place but they are not baseload units. The environmental and tax policies of this state only serve to drive new generation to neighboring states that still sell into the IL market with an economic advantage. Look at the list of companies that won in the auction and look at the companies that are asked to give money to the so called “deal.” The out of state companies get off for free even though they won more in the auction than some of the in state companies that are giving. Let’s hurt the in state companies that provide jobs and pay taxes and install the pollution control devices while we reward the out of state companies that sell into our market, provide no IL jobs, and pay no IL taxes, and pollute on our borders. Great policy.
- Rich Miller - Wednesday, Jul 25, 07 @ 10:54 am:
It’s not so much the plants, but the distribution. The tech is out there. I have a pal who is smart and understands these things (it’s what he does for a living) and he believes they could increase efficiencies by up to 50 percent.
- Little Egypt - Wednesday, Jul 25, 07 @ 11:28 am:
The consumers are getting hosed, no doubt about it. Anytime you mix politics and utility companies, you can bet politics and the utility companies WILL NOT LOSE. So guess who that leaves?
- So Ill - Wednesday, Jul 25, 07 @ 12:02 pm:
Sleep, what I’ll remember is that the Governor failed to support any initiative or take any action to stop this situation from occurring. Moving after the fact, moving ANYWHERE, is better than not moving at all.
We can’t change what happened ten years ago, we can only adapt. Unfortunately, Illinois has proven to not be good at adapting.
Pingback Are rate-relief complaints full of hot air? | Peoria Pundits - Wednesday, Jul 25, 07 @ 12:44 pm:
[…] Rick Miller seems to think so on his Capitol Fax Blog: And here’s something else that the press isn’t covering. Since the new bill does away with the disastrous and stupid reverse power auction crafted by the goofs at the ICC, consumers will be spared from yet another huge rate hike next year, when the second reverse auction was scheduled to take place. […]
- Captain America - Wednesday, Jul 25, 07 @ 1:12 pm:
I never supported a rate freeze. It seemed unreasonable after 10 years.
Except for Paul Revere and a few other knowledgable commentators, I think we’re all pretty ignorant about this complciated subject. My gut instinct tells me, we are all getting “hosed” by Exelon, et al. Sooner or later we’ll figure it out.
- Team Sleep - Wednesday, Jul 25, 07 @ 1:15 pm:
So. Ill, I agree with you. Blago may have supported roll backs or ending the auction, but his staff never seemed to do much.
I just worry about the long-term implications of a short-term bill that appears to be rushed together. We’ll see.
- Paul Revere - Wednesday, Jul 25, 07 @ 1:35 pm:
Rich,
I think you have your facts confused. while most power plants have relatively low efficiencies, that’s more because they don’t use the excess heat. That doesn’t mean old plants could just generate more power. They weren’t designed that way and it just won’t provide a substitute for more base load power.
- Rich Miller - Wednesday, Jul 25, 07 @ 1:37 pm:
You didn’t read correctly. It’s not the plants, but the distribution methods and technology.
- Squideshi - Wednesday, Jul 25, 07 @ 1:48 pm:
We should not only look at the cost that energy consumers pay on their utility bills, but all of the subsidies that the coal and nuclear industries receive, which renewables do not. For example, the nuclear plants get government funded storage and security for spent nuclear fuel for at least the half-life of their industrial waste; and the federal government gives them free disaster insurance, in the Price-Anderson Act. I’ve already mentioned all the subsidies that the coal industry gets. Move some of these subsidies over to renewable energy research and development; or at the very least, agree to subsidize renewables as much as these older and dirty technologies.
- Arthur Andersen - Wednesday, Jul 25, 07 @ 5:29 pm:
Rich, I don’t know a lot about this stuff, but I think you and your tech friend are on point. Recall the Eastern US Blackout of August 2003-that was to an extent caused, or aggravated by, the antiquated power “grid” or distribution network.
Because this type of upgrade isn’t as profitable as say, selling off the power plants, many electric utilities haven’t invested in newer technology.
- make the grid smarter - Wednesday, Jul 25, 07 @ 5:48 pm:
Building more base-load plants to meet peak demand during hot summer conditions doesn’t make economic sense. I’d rather see the utilities invest in energy efficiency (helping customers convert to more efficient air conditioners, high efficiency motors, programmable thermostats, etc.), on-site energy generation and smart pricing programs that shift load to off-peak hours. These programs will help consumers manage their power use and save money over the long term.
- Disgusted - Wednesday, Jul 25, 07 @ 10:20 pm:
Solar panels, folks, solar panels. There will come a point when the cost of energy is so high, people will not be able to continue to pay the bill. Then who’s going to feed the stock holders. Will the last person at the board of directors’ meeting turn out the lights.
- Paul Revere - Wednesday, Jul 25, 07 @ 11:53 pm:
Rich,
Sorry it took so long to respond to your earlier point.
I did read you correctly, but I believe you are mixing issues. The U.S. power generation system is very inefficient compared to some European and Asian countries because it relies on large central power station which then distributes power over fairly long distances. Local generation is generally more efficient, but the entire U.S. system is built contrary to this approach. While it would be great if it was dealt with soon, that kind of change will take decades (as it did in other countries) and won’t solve our near term growing energy demand. This is particularly true given the national regulations almost all of which are designed to protect monopoly utilities.
And to “Make the Grid Smarter” - your point would be accurate if that were the issue. But gas-fired peakers are increasingly being drawn upon for daily usage, not just in the summer months. The more you rely on those gas-powered plants, the more expensive electricity becomes. This is also true regardless of what you do about renewables (which I support, but which also wreck havoc with the grid).
Only by building more baseloasd will we be able to prevent massive price spikes