* I told subscribers about this early yesterday and provided them with the details. This has to rank as one of the weirder end of session gambits I’ve ever seen…
With Illinois struggling for cash, ComEd is offering half a billion bucks to lawmakers, but the trade-off could be higher electric bills for customers.
The Chicago-area utility giant offered Tuesday to give the state $500 million. That could help offset education cuts and a plethora of other funding shortfalls in a budget carrying a $13 billion deficit. And it comes as lawmakers scramble for budget Band-Aids with a scheduled May 7 adjournment rapidly approaching.
In return, the power company wants a rate increase locked in for four years by state law. […]
“You don’t jump into a swimming pool unless there’s water there,” Quinn said. “You’ve got to make sure you’re paying attention.”
The fine print…
The benefits Exelon and ComEd would get would dwarf what they’re offering.
Chief among them would be enshrining in law a minimum 10.3% return on equity for the utility and automatically increasing customers’ rates when profits fall short of that mark. […]
Under the proposed law, a rate freeze would remain in effect until June 2014. After that, the ICC would be largely removed from assessing the need for future rate hikes. And rates would likely climb since future investment in infrastructure would necessitate higher revenues to meet return targets. Such increases would not affect residential and small-business bills until after the rate freeze expires.
ComEd rates are expected to rise 8% in June, to about 12.2 cents per kilowatt-hour from 11.3 cents. ComEd wants to lock that price in for the next four years. Absent an unexpected reversal in today’s low power prices, it is significantly above what ratepayers likely would pay through much of that period.
The big downside…
The idea is a last-minute addition as lawmakers look for an easy way to get free money to help close a massive budget deficit and escape Springfield by Friday to begin their re-election campaigns. To some leading lawmakers, ComEd’s proposal is as politically unpalatable as voting for an income tax increase because it would lead to Chicago-area customers paying more for electricity.
If I was ComEd and Exelon, I might try to quietly derail the budget-making process to boost my chances. I’m not saying they’ll do it, I’m just saying.
Thoughts?
*** UPDATE 1 *** A rival utility is getting into the act. From a press release…
BlueStar Energy Solutions, an energy solutions company based in Chicago, today announced that it is offering Illinois residential consumers the ability to switch electricity suppliers to their residential service to avoid a proposed ComEd energy tax proposal.
BlueStar Energy is offering consumers a 12-month contract at an estimated 8% discount off ComEd’s current rate. Consumers will have the choice to go green for less too. BlueStar will offer 100% Renewable American Energy at an estimated 3% discount off ComEd’s current rate. […]
BlueStar is entering into the Illinois residential marketplace with a groundbreaking new approach: offering customers not only a choice in who provides their electricity – but also a choice in the type of power they wish to use. “Traditional energy or Renewable American Energy, customers will save with us either way,” said Morgan.
Heh.
*** UPDATE 2 *** Attorney General Lisa Madigan…
“It is my job to protect utility customers from excessive rates. I will not support any proposal that forces ratepayers to pay more than they should for electricity. That’s why I fought to eliminate the reverse auction that resulted in consumers overpaying for electricity in 2007. This is just another effort to lock in unjustified profits. I strongly oppose allowing ComEd to use the State’s financial crisis to try to increase their profits by asking ratepayers to pick up the tab.”
- Reality is - Wednesday, May 5, 10 @ 9:57 am:
If they have 500 million laying around then their profit margin is already adequate.
- Scooby - Wednesday, May 5, 10 @ 10:01 am:
Dear Tea Party,
THE GOVERNMENT is contemplating a law that would guarantee a company a 10.3% ROE, this is the time for hyperbole. Go.
- Confused - Wednesday, May 5, 10 @ 10:01 am:
If legislators are really stupid enough to stick their constituents with a stealth rate increase because their own cowardice prevents a real tax increase vote, then Cohen’s suggestion to shoot them all becomes more attractive. I seriously hope taxpayers are paying attention. And, I seriously doubt that they are.
- Nikoli - Wednesday, May 5, 10 @ 10:03 am:
This seems like a “Snow White” moment for Springfield lawmakers…
Do they take the bite out of the pretty little apple and hope that it’s not poisoned? Or do they let it be and have to find another way to raise that kind of cash?
Either way, I wouldn’t want to be one of them right now.
- Greg B. - Wednesday, May 5, 10 @ 10:04 am:
It’s crony capitalism at it’s best. It’s a tax increase laundered through a corporation that stands to receive a substantial profit as a result of not market forces, but political ones.
It’s downright sleazy.
- Pelon - Wednesday, May 5, 10 @ 10:04 am:
As an Ameren customer, I think this is an excellent idea.
- Still Gettin Twisted - Wednesday, May 5, 10 @ 10:05 am:
How much money did ComEd make last year???
- anon - Wednesday, May 5, 10 @ 10:06 am:
this might just force me to move to Wisconsin.
- wordslinger - Wednesday, May 5, 10 @ 10:06 am:
Beware of utilities bearing gifts. Fascinating story. That’s thinking outside the box, huh?
It’s nothing more than a juice loan secured with a back door tax increase. If ComEd has $500 million cash burning a hole in its pocket, maybe the ICC should look at its current rates.
- Anonymous - Wednesday, May 5, 10 @ 10:08 am:
It’s not just ComEd. Quinn’s office is shaking down lots of others in order to get their bills past. It’s no different than the last Governor - Extorting money to get a bill passed.
- reformer - Wednesday, May 5, 10 @ 10:10 am:
The state money wouldn’t be spent only in the area served by ComEd, which means ComEd customers would be subsidizing the rest of the state, as Pelon so helpfully points out.
- Cindy Lou - Wednesday, May 5, 10 @ 10:10 am:
Doesn’t this just put the burden on the very citizens we keep hearing can’t afford a tax increase? Seriously, my personal opinion is a family in ComEd area should not be burdened with higher than necessary bills just so my representative can say he did not raise MY taxes they don’t wanna vote on.
People with lower incomes get tax returns, people with high ComEd bills, get, well high ComEd bills.
- Niles Township - Wednesday, May 5, 10 @ 10:10 am:
I am willing to offer the state a one-time payment of $1,000 in exchange for freezing my income taxes at their current rate (snark intended).
- He Makes Ryan Look Like a Saint - Wednesday, May 5, 10 @ 10:11 am:
I saw today’s advertisement about the Taylorville Energy, why doesn’t the state allow this to go? The jobs alone seem to be a benefit. I don’t see any negatives to the state that needs Jobs and industry.
As far as Com Ed, It is PAY TO PLAY it opens pandora’s box and allows companies to donate to get their agenda through.
What’s next, will state cars, buildings and lawmakers jackets start looking like NASCAR with all the advertising on it?
I don’t like it.
- Ahoy - Wednesday, May 5, 10 @ 10:13 am:
Is this even legal?
I think if this actually happened, lawmakers would face much more backlash then they would with a tax increase.
I still have to think this violates some kind of law.
- NotAnonymous - Wednesday, May 5, 10 @ 10:14 am:
A guaranteed 10.3% ROE is very good. If you invest in the stock market you expect an average return of 6-8% per year…
- OneMan - Wednesday, May 5, 10 @ 10:16 am:
It’s a brilliant play for ComEd…
What public utility wouldn’t be willing to pony up cash now for a profit guarantee. If nothing else they must have figured it was worth a shot.
If I was them I would now come back with a lower rate and a higher payout. We have seen in the past how the state is willing to do all sorts of things to fill budget holes.
I would look for a ‘who will think of the school children’ play on this in a couple of days.
If the state does bit then look for other public utilities to step up and try the same thing.
- Siriusly - Wednesday, May 5, 10 @ 10:16 am:
ANON 10:08 - you need to offer some examples, some proof. I totally think that your comment is bogus unless you can show us otherwise. I think its pretty irresponsible of you to make an accusation like that without any sort of backup information to support it.
This ComEd proposal is fascinating. But as always, Rich cuts to the heart of the matter here. If an corporate interest can pony up $ for the state’s budget in exchange for something it wants, why wouldn’t they maniupulate he the budget negotiations other ways too. This is a very dangerous road to travel down.
- Still Gettin Twisted - Wednesday, May 5, 10 @ 10:18 am:
Forget the legal aspects of it….how about the Ethical questions is raises?? They obviously have floated this idea to legislators and that it made it to the press indicates there has to be some legislative or executive support… Everyone wants to talk about ethics… It’s truly sad the depths our elected leaders will stoop to get re-elected
Pingback Crony Capitalism in the Land of Lincoln | Illinois Alliance For Growth - Wednesday, May 5, 10 @ 10:18 am:
[…] Rich Miller has been all over (and doing a great job) of the big Chicago utilities wanting to give $500 million to the state of Illinois in exchange for allowing the regulated monopolies to raise rates by $.8 per kilowatt hr and freeze those rates for four years. The return on equity according to Rich’s sources would 10 percent plus. […]
- Yellow Dog Democrat - Wednesday, May 5, 10 @ 10:19 am:
If ComEd had any sense, they would have kept this deal under wraps.
And its an interesting play, but I don’t think there’s anything ComEd could do to derail a budget deal that Nature hasn’t done already.
- Irish - Wednesday, May 5, 10 @ 10:20 am:
The GA will probably consider this. How long they think about it before they turn it down is anybody’s guess. However it illustrates the point that I have mentioned on this blog before. The GA and especially the four tops are very quick to distance themselves from anything called an Income Tax Increase. However they will consider and very often pass any bill that costs the taxpayer. There is a plethora of these fees, increases, and hidden taxes, that have been enacted over the last two decades. Bottomline is that the GA does not really care how much cost is passed on to taxpayers they are just concerned that none of those are called Income Tax Increases. They are counting on the fact that the voters are not smart enough or are apathetic enough not to get riled up unless the IT words are used. The problem is that if the Income tax was increased the cost to the individual taxpayer would probagbly not be more than the cumaltive affect of all the other increases.
- Really?? - Wednesday, May 5, 10 @ 10:21 am:
Didn’t I read yesterday that the $500 million they are offering the state be coming from the additional revenue they would make from the rate hike they are proposing? So they are asking to increase our rates by offering money they would make by increasing the rates. That doesn’t even make sense.
- CircularFiringSquad - Wednesday, May 5, 10 @ 10:22 am:
Let’s do a QOTD on what ComEd is really willing to pay $2 billion, $2 zillion?
Maybe we could slide em our pension fund and zero out that debt.
Wonder if NoTaxBill is smart enough to nudge a few GOPers (college towners, prisonites)out to ensure passage and then let everyone twist?
Wait did we start a NoTaxBill sentence with …”is he smart enough….”? Scratch that one.
- Carl Nyberg - Wednesday, May 5, 10 @ 10:22 am:
10.3% rate of return guaranteed? Does that seem a bit high.
What’s the risk for ComEd?
I’m with Ahoy and others that question the legality of this arrangement. It seems like there’s something illegal about giving money to government in exchange for a guaranteed rate of return in a gov’t protected monopoly.
With a guaranteed rate of return, what incentive would ComEd have to try to be efficient?
- Small Town Liberal - Wednesday, May 5, 10 @ 10:25 am:
- It’s not just ComEd. Quinn’s office is shaking down lots of others in order to get their bills past. -
Wow, your grammar suggests you are a skilled journalist with excellent sources that would allow you to make such a bold claim. Stick to the SJ-R comments sections or standing on street corners holding signs.
- Small Town Liberal - Wednesday, May 5, 10 @ 10:26 am:
Also, this is a terrible idea and I hope Quinn and the lawmakers do not agree to it.
- zatoichi - Wednesday, May 5, 10 @ 10:29 am:
If they are remotely considering the ComED option perhaps they should also consider leasing off everything to large corporations with guaranteed returns of at least 10%. Building naming rights, BP gives $1B in exchange for all vendors working with the state only buy gas at BP stations at premium prices of course; A group of Chinese investors give $5B to make 55, 57, 74, 72, 80, and all other major highways tollways; Phoenix University takes over all state university for $750M and controls tuition. There are thousands of huge investors who would be interested. Of course no tax increase would be needed or happen. The additional 20%-30% in costs would simply be price adjustments.
Legislators could then say they have solved the problem and retire. The fact the public would pay far more than any tax increase would be easy to ignore because taxes did not go up.
- just sayin' - Wednesday, May 5, 10 @ 10:30 am:
One of the crazier ideas to come down the pike in quite awhile.
Pay to play is exactly what it is.
Plus one gets the impression ComEd thinks we’re all stupid enough to believe they’re doing something charitable, out of the goodness of their hearts to help a state that’s struggling. Meanwhile, they would obviously cash in big time at our expense.
This is the problem with a monopoly like ComEd. The executives are shielded from real world forces and they get dumb and lazy (kind of like a lot of the lawmakers).
A good case could be made for indictments here.
- OneMan - Wednesday, May 5, 10 @ 10:31 am:
If this happens (and I doubt it will) look for every other public utility to show up proportionally sized offers.
- downstate hack - Wednesday, May 5, 10 @ 10:31 am:
If ComEd wants to lock in the new rate for four years, then customers should demand a cap at the same price. If electric rates escalate ComEd should take the risk not the consumer. I wonder if ComEd would still put up the $500 million under that scenario.
- dupage dan - Wednesday, May 5, 10 @ 10:31 am:
What are the odds here that PQ takes them up on it? An “easy” way is the PQ way. Then when the right entity screams he’ll fold again.
- Just Wondering - Wednesday, May 5, 10 @ 10:35 am:
This idea needs more than Pat Quinn to get a stamp of approval.
- Dooley Dudright - Wednesday, May 5, 10 @ 10:37 am:
Mortgage the farm to buy a little seed corn. And then eat the seed corn.
And still go hungry. And then lose the farm.
Pity, pity, pity.
- Aldyth - Wednesday, May 5, 10 @ 10:40 am:
Is there anything in Illinois that is not for sale?
- OneMan - Wednesday, May 5, 10 @ 10:40 am:
If the money gets more serious it will be in play..
Push off tomorrow what you need to deal with today has been how we have dealing with the budget issues for the last 8 years (and longer) and this plays right into that.
- Dooley Dudright - Wednesday, May 5, 10 @ 10:41 am:
This Exelon/ComEd thing is just as spectacularly short-sighted and craven and stupid as — oh, I dunno — selling off parking meter rights for 75 years.
- dupage dan - Wednesday, May 5, 10 @ 10:59 am:
Well, at least the GA and PQ can say they got some help w/out increasing our taxes. Yipeeeeee!
That’s the beauty of this thing - the state gets “free” money and we don’t pay higher taxes. Oh, wait…
- Siriusly - Wednesday, May 5, 10 @ 11:00 am:
YDD - I agree with you from a strategy standpoint, but its very hard to keep anything a secret when you’ve got Rich Miller sniffing around all the time. The guys makes his living by finding out the inside scoop.
Besides it probably was the Quinn administration that floated the info to see what the reaction would be.
- Siriusly - Wednesday, May 5, 10 @ 11:01 am:
Dudley - that’s a horrible idea. No big city would ever lease away their parking meter rights.
- SUE - Wednesday, May 5, 10 @ 11:01 am:
Before rejecting this out of hand, the reality is that the State needs to find revenue from somewhere- what is the difference between paying higher electricity rates or taxes- What the legislative leaders should do is bargain for more money from Com Ed- if they are willing to contribute 500 million without being asked- perhaps there is a lot ( a lot) more money to be had- I for one would be prepared to pay marginally higher electic rates if it meant more money being available for the U of I or public education K-12- but not as an excuse to have those irresponsible state leaders being allowed to get off scott free and leave Springfield without doing what they were elected to do- governing responsibly by cutting expenses more in line with available revenues-Mike Madigan or Senator Cullerton- are you listening
- Joe from Joliet - Wednesday, May 5, 10 @ 11:16 am:
… 10.3% does that seem a bit high …
That’s about what Quinn wants to give his ‘managers’ in salary increases in FY ‘11. Can’t seem high to him.
- Confused - Wednesday, May 5, 10 @ 11:23 am:
The good news here is that Rich’s update about Blue Star Energy just got me to switch over there– and save money while taking it away from ComEd. Win/Win. I feel like that guy who saved a bunch of money in the Geico commerical.
- How Ironic - Wednesday, May 5, 10 @ 11:32 am:
Thank goodness for CWLP in Springfield. We pay some of the lowest rates in the nation for electric/water. Looks like the cost disparity spread between Chicago/Springfield just got bigger.
What a terrible way to secure income. Mortgage the electric rates of consumers.
- JustaJoe - Wednesday, May 5, 10 @ 11:54 am:
Municipalities often get a deal from franchise agreements with the utility. Maybe now is a good time to ask why the state pays municipal taxes on its ComEd bills and also pays substantial facilities charges and energy costs even while the utility uses state right-of-way free of charge. Just askin’.
- VanillaMan - Wednesday, May 5, 10 @ 11:55 am:
What a horrible idea!
They’ll give us $500 million in order to raise prices on ComEd customers without governmental regulations for years to come?
Not only would ComEd customers get screwed annually for as long as they are in ComEd’s territory - other utilities would take advantage of the price hikes to hike their prices too.
How many reasons are we wanting to give businesses reasons to avoid doing business in Illinois?
I am shocked. The idea that a public utility wants to pay off Illinois government in order to avoid government regulations, is outrageous!
- Responsa - Wednesday, May 5, 10 @ 11:56 am:
–Before rejecting this out of hand, the reality is that the State needs to find revenue from somewhere- what is the difference between paying higher electricity rates or taxes?–
Oh SUE, where to start. Where to start.
- just wondering - Wednesday, May 5, 10 @ 12:05 pm:
How is this ridiculous bribery attempt any different than AT&T and their money thrown around the capitol with 30+ lobbyists and twisted arguments? Aren’t they doing the same thing by getting out of all sorts of regulation? What do I know, but seems crazy that legislators are fooled by these insane utilities.
- just wondering - Wednesday, May 5, 10 @ 12:32 pm:
how’s about setting up a booth near the entrance to the capitol with a sign - “dereg for sale”.
with a nice big jar for the proceeds??? Should be able to plug that $13billion hole nicely.
Shame on those who take these fake astroturf back door rate increases even remotely seriously!!
- OneMan - Wednesday, May 5, 10 @ 12:37 pm:
If you are the public utility it’s logical
- just wondering - Wednesday, May 5, 10 @ 1:12 pm:
dear one man - and if you care about grandma/ grandpa trying to get by on a fixed income, it’s disgusting and borderline criminal.
- Ghost - Wednesday, May 5, 10 @ 2:27 pm:
agree to the terms allowing them to sets rates for the ROE, but remove the monopoly and allow anyone to sell power here
- oneman - Wednesday, May 5, 10 @ 2:44 pm:
Just wondering?
Do you realize most states use profit margin\profit rate as a way to calculate rates now.
- Dooley Dudright - Wednesday, May 5, 10 @ 4:37 pm:
@ VMan, OneMan:
“Shocked” by the conduct of an electric utility, now, are ye?
And “moved” by IDOT and mass transit, I suppose? And “spent” by the budgeting process?
:)
- OneMan - Wednesday, May 5, 10 @ 5:00 pm:
I am taking some “static” for being impressed with ComEd making this move.
I also get a “charge” out of where the discussion is going.
- ToddAF - Wednesday, May 5, 10 @ 5:31 pm:
ComEd just announced it’s pulling the offer because there’s not enough support. http://cbs2chicago.com/local/comed.state.deal.2.1675591.html
- Mr Volts - Wednesday, May 5, 10 @ 5:35 pm:
Just out of curiosity what is the average residential rate per KWH in the area/ I am always curious after all the BS in California during the Enron thing.
- Gregor - Wednesday, May 5, 10 @ 6:07 pm:
I had no idea that Old Man Potter’s first name was “Excelon”. Reall, it’s exactly like that scene in “It’s a Wonderful Life”. Quinn is George Bailey, being offered everything he could want if he signs on with Potter and gives up the old Building and Loan. This is like Moses or Jesus being tempted in the desert, to ask the guy who founded CUB to let rate payers take it in the neck in exchange fora back-door tax loan. If Quinn so much as paused to think about it, I would have no more to do with the man, because he would have reversed himself on everything he ever said he stood for.
The first twenty seconds of this scene is what I’m talking about:
http://www.youtube.com/watch?v=_ebe63QP2nk&feature=related
- wordslinger - Thursday, May 6, 10 @ 10:12 am:
Upon further review, the Exelon “deal” is shockingly sinister and predatory. It’s like some Outfit juice lender circling a troubled business offering to “help” at a usurious price.
The utility business is mind-numbingly boring, but man, that’s where the money goes. We should all probably get a better idea of what these public utilities are up to.
They have a right to make a reasonable profit, if they’re dong their job right. But the fact that they pulled this stunt leads me to believe we ought to get a better idea of what their agenda is. We all know, the lights go out all over Chicago every time there’s a stiff wind.
Maybe we should require them to plow that $500 million they have laying around into their transmission upgrades.