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Friday horror show * Updated x1 *

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The ICC voted to accept the results of the reverse auction, but won’t issue the results until late on a Friday afternoon. What does that tell you?

After enjoying a decade-long electricity rate freeze, residential customers of Commonwealth Edison should brace for a significant increase, an estimated 25 percent, in their monthly bills, according to the results of an energy auction to be disclosed on Friday.

The winning bid to supply power to Illinois is in line with current wholesale prices, according to a source with knowledge of the auction, and that will translate into substantially higher bills.

“This is outrageous,” said David Kolata, executive director of the Citizens Utility Board, who said the increase could exceed 25 percent. “It is a very large rate increase at a time when ComEd’s parent Exelon has record profits and is cutting rates in Pennsylvania.”

The Illinois Commerce Commission voted unanimously Thursday to accept the results of the auction to supply residential customers, while rejecting the results of an auction to supply larger commercial customers, apparently because of an insufficient number of bids.

There was word yesterday that the hike could be a lot more than 25 percent. Either way, I’m wondering if there will be some political fallout here.

Like it said in the article, ComEd’s rates have been frozen for a decade. But the company seems to have made a nice profit regardless. I don’t know exactly who is right and who is wrong, but I’ve learned over the years to rarely, if ever, trust the Illinois Commerce Commission to make the right choices.

And by delaying its announcement until a Friday afternoon, the ICC has once again shown itself to be a bunch of political hacks unworthy of trust.

[Hat tip: CUB blog]

*** UPDATE *** CBS2 has more.

posted by Rich Miller
Friday, Sep 15, 06 @ 9:49 am

Comments

Who is the moron who appointed these people to the current Illinois Commerce Commission? That person, or persons, should be smacked with a rolling pin.

Comment by Buck Flagojevich Friday, Sep 15, 06 @ 9:58 am
I want to hear what Lt. Governor Pat Quinn has to say about this. It is time for him to speak out, if He does not speak out on an issue like this than I guess he really did sell out to the man.

Comment by Anthony Friday, Sep 15, 06 @ 10:05 am
As much as I like low energy prices, there has to be some give. Ten years w/no rate hikes? If you had a job with those perks, what would you do? A total of 25% over 10 years is not that bad, but it is a heck of a shock.

Comment by Wumpus Friday, Sep 15, 06 @ 10:07 am
Oh, don’t worry so much. With ComEd’s CARE commercials all over the radio I’m learning so many ways to alter my lifestyle to save electricity.

Use more candles, wash my clothes by hand, plug into my neighbors external outlet. Just sit back and watch the savings roll in!

Comment by doubtful Friday, Sep 15, 06 @ 10:08 am
When are we going to be getting those electric cars?

Comment by Leroy Friday, Sep 15, 06 @ 10:32 am
The reason that rates were frozen for so long was that ComEd had some of the highest rates in the country. They now want our sympathy for not being able to maintain their status as the most expensive elctricity.

The ICC is filled with industry hacks. What I want to know is what happened to the rabbid CUB?

Comment by Political Insider Friday, Sep 15, 06 @ 10:56 am
Marty Cohen wouldn’t stand for this! Thank you, Senate Dems & Emil Jones!

Comment by Ravenswood Right Winger Friday, Sep 15, 06 @ 10:59 am
I don’t understand how this two-step is being accomplished. The ICC is a public body subject to the Open Meetings Act. How can they act on something without it becoming public at the time they take the action?

Comment by Anon Friday, Sep 15, 06 @ 11:10 am
“I donâ€™t know exactly who is right and who is wrong, but Iâ€™ve learned over the years to rarely, if ever, trust the Illinois Commerce Commission to make the right choices.”

Rich, you get it. Von Hayek would be proud. Markets aren’t perfect, but government regulators are even less so.

Comment by Greg Friday, Sep 15, 06 @ 11:45 am
Should not have done it, should not have done it, should not have done it! “It” is DEREGULATION or REREGULATION.

What a fiasco. Few stood up against this concept in 1996-97 and sure is easy to 2nd guess, but there were those who believed the entire concept to be flawed.

From what I understand, Exelon and Ameren chose to “spin” off or sell their generation under the 1997 law. They were not required to but they did. Then they signed power purchase agreements with those “new” companies. Those agreements expire on 12/31/06 and ComEd & Ameren say the Federal Energy Regulatory Commission will not allow them (PPAs)to be renewed. Thus the only source for generated electricity is the open wholesale market, and in Illinois it is via the reverse auction.

The result of the auction is a direct pass through price for customers based on ComEd and the Ameren companies cost of buying the generation via the auction. The large industrials have an option to the auction price, Alternative Retail Electric Suppliers (ARES), who offer generation services to large industrials.

But the kicker is residential customers have no “choice” but to accept the auction price. There are exactly 0 ARES offering generation services to residential and small commercial customers.

Since 1997 the total rate package for ComEd and Ameren IP/Cilco/CIPS has been frozen by the 97 legislation. Generation costs have risen mainly due to fuel costs and costs for the wires & pipes portion of the business have gone up also. So now CoMed and the Ameren Companies are financially strapped and are asking for delivery service (the regulated wire and pipes portion) rate increases while the generation auction will cause a rate increase also. By the way on August 30, 2006 ComEd only got .5% from the ICC on their delivery service rate case, I believe they requested 17%.

The interesting piece of this is the holding companies of ComEd and IP/Cilco/CIPS, Exelon and Ameren, have recently enjoyed record profits and it happened while the regulated subsidiaries had their rates frozen and costs rising.

The new law in 97 was called the “Electric Customer Choice and Rate Relief Law of 1997″. So there was 10 years of relief and the bulk of the customers still have no choice.

What a mess.

Comment by aidanquinn Friday, Sep 15, 06 @ 12:42 pm
I don’t know enough about the energy field to know if this is fair, but I know I’ll have to pay the increase.

Another reason why the state needs to lower my taxes even if they have to cut a few lucrative govt jobs. I can’t afford to pay all these energy increases plus support a lavish state bureaucracy, hundreds of millions of pork every year, patronage, no-bid contracts global expensive lunch partnerships and so on. Something has to give.

Comment by Cassandra Friday, Sep 15, 06 @ 1:09 pm
God bless capitalism.

Let’s see - the legislature forced the energy companies to cut rates by 20 percent and freeze them for 10 years. Can someone else please tell me a commodity that had its price slashed and frozen for 10 years???

The only reason the increase is double digit is because they have not been able to increase prices marginally for a DECADE.

While were at it, lets mandate that gas stations can charge no more than $1.39 per gallon and the price of a McDonald’s hamburger can’t exceed 48 cents.

Government should stay out of it and let the market dictate the terms.

And NO, I do not work for a utility company - I am just a semi-regular reader who gets frustrated by the hypocracy that I see on this an other blogs.

Comment by sanity Friday, Sep 15, 06 @ 1:58 pm
Can we partially blame you Rich, for running those CORE ads on your site? And having them sponsor posts?

(Just kidding… mostly)

Comment by JohnR Friday, Sep 15, 06 @ 3:50 pm
Proviso Probe has solicited all Proviso state reps for their position on extending the rate freeze.

I encourage other bloggers to take responsibility for learning their reps’ position on extending the rate freeze.

Contact me, RadioNyberg circled “a” Yahoo or (773) 430-3538 if you want to organize to block this rate increase.

Comment by Carl Nyberg Friday, Sep 15, 06 @ 3:52 pm
Deregulation without ensuring competition is just gouging the consumer.

ComEd/Exelon shouldn’t be so greedy.

Comment by Carl Nyberg Friday, Sep 15, 06 @ 3:54 pm
GOSH glad I’m on REA.

Comment by NIEVA Friday, Sep 15, 06 @ 5:44 pm
Looks like the rate hike won’t be as high as initially feared (40-60%). I wonder if CUB was playing in to comed’s hands with all the alarmism.

Nobody likes a rate hike, and I have no doubt that comed is coming out smelling like a rose from all this, but c’mon, we have had a rate freeze for 10 years, and are currently paying below ‘market’ prices. Things could be worse.

Comment by anonymouse Friday, Sep 15, 06 @ 8:35 pm
This is the natural result of the electrical “deregulation” legislation that was adopted by the General Assembly and signed into law by Governor Edgar.

This is another result of the natural and continued tendency of the members of the Illinois General Assembly to vote for things that provide a short term benefit at the expense of the long term results.

The deregulation was pitched in the context of rhetoric about “increased competition,” “free markets,” “consumer choice,” etc.

If you read the histories of Enron you will note that Ken Lay was apparently one of the ardent supporters of deregulation. Among other things, he understood that Enron’s engergy trading division had the potential to make a great deal of money off this new system.

I’m a Republican free market type by nature, but those of us who had some courses in economics in school understand that there are certain things, like public utilities, that are natural monopolies and should be regulated like natural monopolies.

Unfortunately, it will be difficult to undo the deregulation. Traditional utility companies don’t exist any more. As noted by another commenter, the utilities have been broken up in the companies that generate electricity, other companies that own the power lines, etc.

It is easy to bash the commerce commission and I’m sure the politicians will do so as a mechanism to deflect the blame from where it rightly belongs. But, the ICC is required to follow the law, and that’s all they have done here. The blame is with the Illinois General Assembly who voted for the current system and Governor Edgar who signed the legislation. In addition, fault is with Marty Cohen and the folks at Cub who didn’t do their job by pointing out the inevitable problems associated with attempting to introduce deregulation and ersatz free market concepts into an area where the free market cannot ever work.

Damn, Skeeter might even agree with me on this one.

Comment by Just the Facts Friday, Sep 15, 06 @ 9:22 pm
JTF –

Right you are. It all goes back to the time when the utility owners took a look at what they were doing and how it affected their stock price — which is a function of rate of return and risk.

As long as the utility was a single company and a monopoly it was fully subject to the ICC (and other state’s regulators, if applicable) and a limited rate of return given that they were a monopoly.

But if the company could be ripped asunder and the generating activities separated from the electric (similar for gas companies) retail delivery and service activities, they could get a guaranteed rate of return on the latter and theoretically be unregulated and sell their production on the open market at whatever price they could get. The generating company could even sell the output to the ‘other’ company. It was like a license to steal.

COMED with its nuclear facilities is a low cost producer. But the market price of electricity sold is a single rate reflecting in one sense the average cost of all sources of power. That means, in effect (like the Saudis at the well head), that the production of Exelon gets supermarginal returns and the purchaser, COMED pays a price higher than they would have paid when it was a single company. The myth is that the unregulated company is a separate being and should be able to take what the market can bear. Thus COMED can deliver dollars to the unregulated ‘company’ to create those profits, as its consumers pay, based on the now higher costs, extra dollars embeded in higher rates to leave the regulated rate of the return as approved by the ICC.

In other states without nuclear power generation, the consumers there are being subsidized by the Illinois nuclear generating facilities and thus by Illinois consumers.

Comment by Truthful James Monday, Sep 18, 06 @ 7:46 am