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Commonwealth Edison in recent years has endured a humiliating — and deserved — comeuppance.
Its status as the most politically powerful company in Illinois came to an abrupt end in 2020 when the utility admitted to a nearly decadelong bribery scheme aimed at winning highly lucrative legislation in Springfield in return for serving as something of a ghost payrolling service for then-House Speaker Michael Madigan.
So earlier this year it was with some level of chutzpah that ComEd petitioned the Illinois Commerce Commission, which regulates utilities, for a record-shattering delivery rate hike of $1.5 billion over four years.
To their credit, the regulators Thursday rejected most of ComEd’s filing, substantially reduced its requested profit level on the capital spending they did approve, and told the utility to go back to the drawing board on the investments needed to fulfill the state’s clean-energy goals.
Thursday’s events were a jaw-dropper for those used to watching previous commissions act essentially like patsies for the utilities they’re supposed to regulate.
Now, the question is, how will ComEd respond?
Will it resort to lawsuits and argue that the regulators are exceeding their authority? Will it ask the General Assembly to overrule the commission, as ComEd did time and time again during the period it was bribing the state’s most powerful politician? Will it do both?
Or, will ComEd get the message and adjust?
The gravy train is at an end. The days of massive rate hikes, helping to finance yearly dividend increases of 5% or more for investors, are over. The public wants a cleaner power grid, and it wants reliable service. The utility must provide that at a reasonable cost.
Investors in ComEd’s parent Exelon, based in Chicago, sure got the message. Exelon’s stock dropped 7.6% on the news. Commissioners gave ComEd just $506 million of the $1.5 billion it asked for.
Still, it’s not all doom and gloom for ComEd. It continues to milk the laws enacted under Madigan for lots of cash. Even as the commission shut down most of ComEd’s four-year plan, the regulators had little choice but to approve $259 million in higher rates based on a 2011 law that expires soon. That’s because ComEd didn’t earn what it was “entitled to” under its last rate case, decided around this time last year, and came back to its customers to make up the difference.
Yes, you read right. One of the most obnoxious aspects of utility regulation in Illinois is that when rates are set for ComEd and downstate electricity utility Ameren Illinois, the companies are all but guaranteed a certain profit level.
That prior law — the so-called formula rate, a centerpiece of ComEd’s corrupt bargain with Madigan — made a mockery of utility oversight. Utilities are by definition monopolies. ComEd is the only company in northern Illinois allowed to deliver electricity to homes and businesses.
Since Thomas Edison invented the lightbulb and later created the beginnings of the electricity grid, the tradeoff has been thus: The financial benefits conferred by monopoly rights are tempered by state regulation of rates. Electricity simply was deemed too critical to modern living and economic development to allow the companies to call their own shots.
ComEd convinced state lawmakers in 2011 essentially to put its rates on auto pilot. It promised to update the power grid and install smart meters in all homes and businesses. In return, it was allowed to update its rates annually with only cursory ICC review. The result was hundreds of millions in delivery rate hikes over the 12-year period the law was in effect.
Just to make sure ComEd got what it paid for with Madigan, it won the right to charge ratepayers an extra amount the following year in order to be made whole if costs and revenues didn’t materialize as expected. Likewise, if ComEd did better than planned, it would have to reimburse ratepayers. The benefit, though, was huge. Effectively, ComEd’s profits were guaranteed.
Chicago Tribune Opinion
What business wrestling with market forces wouldn’t love the same? Imagine being able to go to customers after the books are closed for the year and tell them, “We didn’t quite make our budget, so we’re going to charge you extra next year to make up the difference.”
One might think Pritzker and state lawmakers would have taken the first opportunity to eliminate that policy once the ComEd scandal erupted. Instead, they kept guaranteed profits intact in the landmark Climate & Equitable Jobs Act, enacted in 2021, more than a year after ComEd admitted its guilt.
So, even as ICC Chairman Doug Scott and fellow commissioners clamped down on ComEd’s ridiculous proposal, their hands were tied on the $259 million stemming from a law now sunsetting. That by itself will mean another $3 a month on the the average northern Illinois household’s electric bill. Had the $1.5 billion request gone through, it would have cost the average residential customer $16 more a month by the time it took full effect in four years.
If ComEd and the labor unions it relies on return next spring to the Capitol with hats in hand, Pritzker & Co. ought to end the profit guarantee, as they should have done in 2021. And if they don’t, Scott should reduce ComEd’s authorized returns to mid-single-digit levels commensurate with other companies that bear no financial risk.
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