Thursday, December 21, 2006

Phases of deregulation

This week the Illinois Commerce Commission approved Commonwealth Edison’s and Ameren Illinois’ plans for phasing in higher electricity rates, which have been frozen for nearly 10 years by a state law that expires in about a week. Essentially, residential customers, small businesses and municipalities will get to decide whether a) they want to pay the full increase each month come January 2 or b) pay smaller increases over three years with a balloon interest payment at the end. Businesses and other major electricity users not eligible for the phase-in will have to pay even higher increases or find another power supplier.

Lt. Gov. Pat Quinn doesn’t like the phase-in plans. “They’re trying to put perfume on a skunk,” he said Wednesday in a phone interview. “The concept of requiring customers to pay interest down the road — we’re going to end up having payday loan stores right next to the electric company.”

He supports legislation that has the backing of House Speaker Michael Madigan that calls for a three-year rate freeze, but the measure failed the House last month. Madigan said he expected it to gain approval in January. Yet, it’s unlikely a rate freeze would gain necessary approval in the Senate.

That means ComEd and Ameren will have to adjust to paying more for buying and distributing electricity. And customers, especially residents and businesses who use Ameren’s electricity, will have to adjust to increased monthly rates.

The Illinois Commerce Commission got to this point by trying to strike a balance between allowing utilities to collect the money they need to survive and protecting consumers from high prices and unreliable service, according to Kevin Wright, one of the five commissioners. He spoke during Wednesday’s public utility hearing in Chicago that was heard over teleconference in Springfield.

Commissioner Erin O’Connell-Diaz agreed. “It’s not a 100 percent win for everyone,” she said. “I think in these types of situations, everyone should walk away a little unhappy.”

But the tough decisions aren’t over. Come spring 2008, the commission will have to coordinate another process so utilities can start buying a three-year power supply every year, according to Harry Stoller, director of the commission’s energy division.

While the commission staff investigates the next phase of this new system, the question remains whether the process will actually spur competition and increase consumer choice. In fact, Stoller said one who speaks of a deregulated electricity system speaks of a “fictional state of affairs that will never be reached.”

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