Tuesday, July 24, 2007

How do you spell relief?

A long awaited plan for electricity rate relief was announced Tuesday by Illinois’ two major utilities. It’s expected to be discussed and possibly voted on in the House Wednesday. The package is the result of months of public hearings and closed-door meetings, but it may not meet some expectations.

Customers around the state could get a lump sum credit in their September bills ranging from about $50 to about $80, which would cover some of their increased costs for the first half of the year. Starting in October, they would get monthly credits that would eventually decrease until they phased out in 2009.

Officials from the utilities — Commonwealth Edison that serves northern Illinois and Ameren Illinois that serves south of I-80 — held separate press conferences in Springfield to say they supported the compromise proposal.

“It is a very expensive deal for, I think, our industry and for the generators in this state, but I think it does strike all of the right balances,” said Frank Clark, ComEd chairman and chief executive officer.

It’s expensive for power generators because they’re footing most of the $1 billion package, which prevents Clark and Scott Cisel, Ameren Illinois president and chief executive officer, from projecting financial bankruptcy like they did for months as the General Assembly threatened to refreeze electricity rates to give customers a break. But in exchange for the power generators paying for the credits, state lawmakers agreed not to reinstate a freeze or levy a tax on power generators, Clark said.

There’s also something for everyone. House Speaker Michael Madigan and Attorney General Lisa Madigan would get their Illinois Power Authority, a new public power agency that would buy power on behalf of the utilities and potentially generate its own power. Gov. Rod Blagojevich also would get some of his environmental policy proposals for energy efficiency and renewable resources. And Senate President Emil Jones Jr. doesn’t have to vote on a rate freeze.

But it’s not a completely rosy picture. There are lots of questions about the pending legislation. State Rep. Bill Black, a Danville Republican, pointed out on the House floor Tuesday that the monthly credits won’t live up to the hype. “You may see a 70 percent reduction in the increase, but you’re not going to get a 70 percent reduction of your bill,” he yelled. He’s right.

Here’s a chart with examples of Ameren Illinois bills before and after the relief. Regional info can be found here. ComEd customers in October and beyond would get an average monthly credit of about $7 — that’s half of the $14 average increase they were paying over their 2006 monthly bills. “When you hear us talk about $7 a month, I know that’s not overly exciting,” Clark said, “but it’s approximately half of the increase.”

From the industry’s point of view, here’s a few ongoing questions:
- A newly created Illinois Power Authority would buy power on behalf of the Illinois utilities, but it’s unknown how successful the state would be in buying power at a cheaper rate than the utilities.
- It’s also unknown how the state would succeed in building power plants and essentially competing with existing power suppliers.
- It’s also unclear how the proposal would be flexible in allowing utilities and their parent companies to restructure. Further, what are the implications of any restructuring?

1 comments:

Extreme Wisdom 10:21 PM  

I was looking through both the US and Illinois Constitution, and I had trouble finding the clause stating that Illinois citizens had the right to electricty at rate below the cost of production.

This isn't an attempt to defend utilities that game the absurd regulatory environment, but why should anyone get energy cheaper than the cost to produce it?

Maybe more people should hook up generator to their treadmill.

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