|
ComEd's $500M state aid swap for billions in profit dies
May 5, 2010—Commonwealth Edison Co.’s proposal to trade a four-year, above-market electric rate freeze for $500 million to the cash-strapped state is dead, according to people familiar with the negotiations.
by Steve Daniels, Crain's Chicago Business The draft proposal — from which the utility's parent company, Exelon Corp., stood to make billions over the life of the deal — surfaced suddenly in Springfield on Tuesday, with ComEd making clear to state officials that it wanted the offer considered before the end of the week. The General Assembly is scheduled to end its regular session as soon as Friday. But the deal never gained any momentum, as rank-and-file lawmakers expressed opposition and Democratic leaders remained silent on the offer. Earlier Wednesday, Illinois Attorney General Lisa Madigan, whose father, Michael Madigan, is House speaker, came out with a strong statement against the measure. “It is my job to protect utility customers from excessive rates,” she said in a statement. “I will not support any proposal that forces ratepayers to pay more than they should for electricity. That’s why I fought to eliminate the reverse auction that resulted in consumers overpaying for electricity in 2007. This is just another effort to lock in unjustified profits. I strongly oppose allowing ComEd to use the state’s financial crisis to try to increase their profits by asking ratepayers to pick up the tab.” A spokesman for Mr. Madigan said the ComEd proposal “appears too complex and came too late in the session to be fully evaluated.” ComEd sought to lock in an 8% rate hike, set to go into effect in June, for an additional four years. With wholesale power prices expected to remain well below the levels embedded in that rate, ComEd faces a major earnings decline in 2012, when most of the above-market power contracts held by its power-generation arm are set to expire. The rate freeze, with accompanying power-generation pacts, conservatively would have boosted Exelon’s estimated pre-tax earnings between $1.7 billion and $2.5 billion over the four years from June 2010 to June 2014, according to a utility investor who provided the estimate on condition of anonymity. Another institutional utility investor pegged the potential earnings increase at closer to $4 billion. That difference in benefits to the state and the utility were clear to some lawmakers in Springfield who wondered why ComEd was offering just $500 million when its parent was in line to get billions, according to one source familiar with the discussions. A ComEd spokeswoman wasn’t immediately available to comment. |