Tuesday, March 08, 2011

Utilities seek to increase rates to upgrade grid

By Jamey Dunn

Utility companies hope to raise rates to help finance upgrades to the state’s electric grid and infrastructure, but regulators and community advocates say the proposed changes would result in automatic annual rate increase for consumers.

In its current form, House Bill 14 would let utilities that commit to investing in upgrades to set their rates annually through a formula. The Illinois Commerce Commission — which currently approves or rejects requests for rate increases after an 11-month review process — would have 45 days to object to new rates. The commission also would be tasked with policing how the utilities are spending the new revenues and verifying that the money is going to projects to strengthen the grid.

“Under the current system, do the utilities always get what they want? No. Do the consumer advocates always get what they want? No. This means the process is balanced, and it falls somewhere in between, and it works,” said Paul Gaynor, chief of the public interest division in Attorney General Lisa Madigan’s office.

Susan Satter, a senior attorney in Madigan’s public utilities bureau, described the legislation as an “automatic annual rate increase” because the commission would not have the necessary time to research the rates. Satter said the proposed process would “effectively leave the Commerce Commission, the attorney general and other consumer advocates on the sidelines as Illinois utilities automatically raise their rates year in and year out.”

The Commerce Commission opposes the bill in its current form. Spokeswoman Beth Bosch said the agency has questions about the rate formula, the smart grid plan and the spending oversight in the legislation.

However, representatives of the state’s major utility companies say the state needs to update its woefully out-of-date grid to make it more reliable and efficient, as well as to prepare for the technology of the future, such as electric cars. Under the plan, Commonwealth Edison (ComEd), which is pushing the change, would invest $2.6 billion in grid upgrades. Rates for ComEd customers would increase by about $3 a month. Ameren would invest about $950 million, and its customers would see an estimated $5-a-month rate increase. Those increases would come on top of regular rate jumps that utilities describe as the cost of doing business. Utility providers say that in return for the rate increases, customers will eventually see more reliable services, as well as ways to save on their bills through energy efficiency and an updated metering system.

“If Thomas Edison and Sam Insul, the innovators of the original grid, took a tour in 2011 of any system in the United States, they would not bat an eye as they would see essentially the same technology they deployed 100 years ago, operating in much the same way,” said Anne Pramaggiore, chief operating officer of ComEd. She added that 44 other states are taking “significant action” to modernize their grids. Pramaggiore said ComEd is already making investments in the grid but can only make limited changes because the company cannot predict its future revenues, as determined in part by rate increases that the Commerce Commission approves or rejects.

Craig Nelson, senior vice president of regulatory affairs and financial services, agreed. “We need to upgrade, strengthen and modernize our utility structure. … In order to make these incremental investments, we must also upgrade, strengthen and modernize the rate-making process in Illinois.”

Advocates for grid upgrades say they would make the state’s energy system more environmentally friendly, but environmental advocates said HB 14 does not do enough.

Jack Darrin, director of the Sierra Club's Illinois chapter, said the group is in favor of updating the state’s power grid. However, he says the bill needs more specific commitments to encouraging renewable energy and making sure Illinois is prepared for the infrastructure that would be needed for widespread use of electric cars. “House Bill 14 currently doesn’t do those things.”

Parties on all sides of the debate said they are willing to work on the concept and find areas of compromise, and sponsor Rep. Kevin McCarthy, an Orland Park Democrat, said he plans to make changes to the bill.

On one side, you have utility companies with lots of money and lobbyists. On the other is a regulatory body, backed by the attorney general, that does not want to give up its oversight powers. Look for this to be a hot topic throughout the legislative session.

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