State rate freeze bill seeks to halt ComEd and Ameren quest for windfall profits
CUB, a coalition of consumer groups, and a handful of Illinois legislators continue to push for a proposal that would extend an electric rate freeze by three years and stop the states two biggest power companies from plans to raise customers bills by nearly 40 percent.
The Electric Consumer Protection Act (HB5766), sponsored by Rep. Lisa Dugan, of Kankakee, would extend the rate freeze through 2009. It also would subject electric rates to state oversight until at least 33 percent of residential customers are served by alternative suppliers.
Unfortunately, since no alternative electric suppliers are competing against the monopoly utilities for residential customers, as CUB predicted in the deregulation debates of 1997, the rate freeze measure would stop implementation of the reverse-auction system. The auction was approved by state regulators as the new way for Ameren and ComEd to buy power, if the rate freeze is allowed to expire at the end of this year.
Both utilities pushed for the auction system, which would abolish regulations that protect consumers from unjust rate hikes, leaving them at the mercy of a volatile market. In New Jersey, the only other state with an auction system, wholesale energy prices just jumped by 55 percent.
Although the General Assembly ended its 2006 business without acting on the proposal, a special session on electricity issues could be called anytime before 2007.
The rate-freeze bill was announced as CUB released a study showing that Ameren and ComEds parent company, Exelon, have been wildly successful under the rate freeze, which has been in place since 1997.
In fact, Exelon/ComEds return on equity is tops among power companies, and would continue to be among the best in the power industry even if rates were frozen, according to the study by Edward Bodmer, former vice president at the First National Bank of Chicago. Return on equity, a key measurement of profitability, shows how well a company uses investor money.
Bodmers study also showed that Ameren, which has seen profits double under the rate freeze, has enjoyed a stock value increase that is 346 percent more than the increase of the S&P 500, a reliable stock market barometer.
HB5766 would allow power companies to make a healthy profit while protecting customers from unjust rate hikes, said CUB Board Vice President Valeri DeCastris of Rockford. Otherwise, the big power companies will become deregulated monopolies.
While Exelon acknowledges that it is healthy, the company claims ComEd is not. However, other studies debunk that myth.
In addition to the auction, ComEd is pushing a $336 million increase in the rates it would charge customers to deliver power to their homes. Studies by CUB and other consumer advocates show that ComEd is so healthy that it doesnt need the rate hike.
The Ameren companies are proposing similar rate hikes of $14 million to $145 million, but the recommendations of consumer advocates have ranged from no increase for AmerenCIPS to less than half what AmerenIP asked for.
In a time of layoffs and unemployment, high gasoline prices, decreasing discretionary income and increasing costs borne by businesses, Illinois ratepayers cannot possibly be expected to absorb higher electric prices, in northern Illinois or anywhere else in the state.
From the June 21-27, 2006, issue