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Madigan interview link

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Illinois

Here’s the link I promised in today’s Capitol Fax. And here are the relevant paragraphs:

SPEAKER MADIGAN: I think we ought to spend a lot of time on electric utility deregulation because, although Illinois appears to have successfully transitioned to deregulation, thereâ€™s a lot of serious issues to be addressed in terms of electric utility deregulation.

Number one would be the rate freeze that was put in place. At the time, it was argued that this would be beneficial for ratepayers, especially residential ratepayers. Over time, a legitimate question has been put, â€œWell, although we put a lid on what the rates might be, we may have also put a floor on what the rates could be.â€ And competition over the last couple years, without the rate freeze, may have driven those rates lower than they are right now.

In addition, we provided for what they call stranded costs at the time of the electric utility deregulation, which is an industry way of saying that the mistakes of the utility companies, notably Commonwealth Edison, in building nuclear plants would be paid for by the ratepayers. We did that.

Having done that, having done the rate freeze, youâ€™re now looking at a cliff, in terms of where you go with cost for the utility companies and for the rates.

In the case of the telephone companies, there has been a great change in telephone service. You probably carry a cell phone. And so all of that should be reviewed now, rather than later, because of the dramatic changes in the industry and technology.

ILLINOIS ISSUES: The argument is that a move to a more free-market system would benefit everyone?

MADIGAN: And in the case of the phone regulation â€” privately, I put the question, and I guess Iâ€™ll put it publicly right now: Why couldnâ€™t we follow the model that we followed in electric utility deregulation, where, in essence, we made Commonwealth Edison and the other distribution companies common carriers and took them out of the generation business. Why couldnâ€™t we just make SBC a common carrier for distribution and take them out of the other aspects of it. Iâ€™m sure they have some kind of response, but I think itâ€™s a question that ought to be put.

If you were to do that, then thereâ€™s a little more rhyme and reason to this idea that theyâ€™re deregulated, but the legislature or the Commerce Commission is setting the rate for wholesale sales from people like SBC to the others.

posted by Rich Miller
Wednesday, Jan 26, 05 @ 3:54 am

Comments

Comment made by Speaker Michael Madigan:
“….privately, I put the question, and I guess Iâ€™ll put it publicly right now: Why couldnâ€™t we follow the model that we followed in electric utility deregulation, where, in essence, we made Commonwealth Edison and the other distribution companies common carriers and took them out of the generation business. Why couldnâ€™t we just make SBC a common carrier for distribution and take them out of the other aspects of it. Iâ€™m sure they have some kind of response, but I think itâ€™s a question that ought to be put.”

Well, first off, just a minor quibble - we didn’t really take ComEd out of the power generation business - just moved it over to Excelon Nuclear. Did get them to sell the coal units over to Midwest Generating, which they were thrilled about doing.

However, this is an excellent question, but in actuality, the best thing the Speaker can do here is to make sure NOTHING legislatively happens, because the marketplace will take care of these issues.

The future for telco companies like Verizon & SBC has the very real potential to be a bleak one indeed. Unless they can get government to reinstate their exclusive franchise over telco products, they’re dinosaurs.

Wait for WiMAX (& the followup technologies) to hit (plan on 2 to 2.5 years for it to be in full swing). Then it’s all going to be VoIP over WiMAX and all the RBOC’s (Regional Bell Operating Companies) & Verizon will have declining markets and they’re going to be the high cost providers. Just don’t try & do like what the State of PA did and try and legislatively stop the City of Philadelphia (and all other municipalities) from putting in citywide WiFi & making it available to their citizens.

Telecom deregulation - As an example, see Skype v 1.1 (Do a GOOGLE search on Skype) and see what scares the teleco’s.

Also, as a btw, you’ve never seen a case of “sunk costs” like what the telco’s have to deal with. That’s another reason why they’d fight Madigan’s ideas tooth & nail…..

Comment by Anonymous Wednesday, Jan 26, 05 @ 12:26 pm
Oh, so now Michael Madigan is bringing up the potential merits of “structural seperation”, which is the term used to define the sort of thing he’s talking about. That was a good idea five years ago. Maybe it still is. Michigan has been talking about it for years and the telco’s will fight it, but what do you expect?

Comment by Anonymous Wednesday, Jan 26, 05 @ 4:15 pm