ICC: Approve ComEd Auction; Demand Lowest Price Possible

Published January 24, 2006

For the past decade, Illinois electric customers have seen their rates frozen in place thanks to a smart decision by the state following deregulation.

Not only has that been a boon for customers, but it has also greatly benefited Commonwealth Edison, which has made enormous profits over the same period, contributing its fair share to the stock price of its parent company, Exelon.

Because the price of energy was so low, ComEd even decided to ask the state to extend the rates another two years.

But in 2007, the freeze will go away, and there is no doubt that we will see our electric bills go up.

Everyone should have anticipated this day coming. Over the last 10 years, we’ve seen a rise in a number of goods and services, and it’s reasonable to expect that our rates will also rise.

As a major employer of the state – in addition to being a good corporate citizen – we should want companies like ComEd to make as much of a profit as possible, as long as they do their part to ensure that they are providing customers the lowest cost possible for electricity, which is state law.

On Tuesday, the Illinois Commerce Commission has the difficult task of considering a proposal by ComEd to allow them to conduct an auction to purchase electricity, a result of the company no longer owning its own power plants, even though they will undoubtedly buy some from Exelon.

In addition, ComEd is also asking for delivery fee increases to allow it to recoup the costs of improving the infrastructure over the last several years.

Illinois’ political leaders are not excited about being blamed for higher electric bills in an election year. Gov. Rod Blagojevich has already come out against it, even going as far as threatening to remove ICC board members who support ComEd’s proposal. We find that rhetoric is uncalled for, and doesn’t allow for ICC to make a decision that isn’t tainted by politics.

The Citizen Utility Board is on record opposing the auction, but they haven’t offered an alternative that makes sense. It isn’t their job to do so, but to stand up and say they oppose something, while not offering an alternative that makes sense, really doesn’t help the cause.

A more reasonable strategy would be to allow market forces to set prices, even if it brings higher prices, but then to make sure there are strategies in place to help the state’s neediest families get through the pricing changes. We should not expect our elderly, disabled and low income citizens to bear the cost of these higher prices. Their burdens are already too great.

There are programs in place already to help those below the poverty line pay their bills. The Low-Income Home Energy Assistance Program, for instance, is a federal program that spends billions every year to help low-income and fixed-income families cover their heating costs. ComEd provided $4 million last year to LIHEAP, and ComEd Chairman and CEO Frank Clark has pledged more than that after 2007. Also, the company has offered to defer billing needy families for several years.

No one likes to pay higher prices for anything, and in normal marketplace circumstances our quest for lower prices results in more efficient markets. But electricity is not a normal marketplace, and politicians pander to our desire for unrealistically low prices. The result threatens the ability of companies like ComEd to do their jobs.

Reliable and ample electricity comes with a price. The ICC ought to overcome political pressures and allow ComEd to find that reasonable price.

Lee H. Walker ([email protected]) is the president of one of the nation’s leading black public policy think tanks, The New Coalition for Economic & Social Change. He is also a member of the editorial board at The Chicago Defender, the nation’s only daily black newspaper and is a Senior Fellow at the Heartland Institute.