Exelon's eastern power line would boost ComEd rates – again
By Steve Daniels, Crain's Chicago Business
November 21, 2011 — Exelon Corp., fresh from winning the right to hike Chicago-area electric rates annually, is preparing to stick local customers with part of the tab for a new transmission line that will raise their bills even more.

Read the full version of this story on Crain's website.
The $1.6-billion, 420-mile high-voltage power line will link Chicago-based Exelon's Illinois nuclear power plants to markets to the east, where electricity prices are 22% to 35% higher than they are here. That will boost rates for customers of Exelon's Commonwealth Edison Co. when the line is completed in 2018, Chief Operating Officer Christopher Crane acknowledged Oct. 31 in testimony before Maryland regulators reviewing Exelon's proposed acquisition of Baltimore-based Constellation Energy Group Inc.

If approved by regional power grid administrators, ComEd customers also will pay for some of the cost of building the line.

“This plan forces Illinois consumers to pay something for nothing,” says Paul Gaynor, chief of the Public Interest Division for Illinois Attorney General Lisa Madigan. “We'd wind up footing the bill so that Exelon can deliver power to and receive profits from outside the region without Illinois consumers seeing any benefit in return.”

Selling more power from Exelon's six Illinois nuclear plants in pricier Eastern markets long has been a goal of CEO John Rowe. In 2004, he opted to link ComEd to Valley Forge, Pa.-based PJM Interconnection LLC's regional power grid serving mainly Pennsylvania and the mid-Atlantic states in part to reach those higher-priced areas.

POWER DRAIN

Over the past decade, the relative scarcity of out-of-state transmission outlets for electricity from Exelon's Illinois plants increased the supply of power in Northern Illinois, keeping wholesale prices lower here than in the East, where supplies are tighter.

Potentially exacerbating the effect on ComEd customers: The company's timeline targets completion in 2018, when it projects power supplies in the region will fall as owners of old coal-fired power plants opt to shutter their facilities rather than pay for federally mandated pollution controls. By then, ComEd already will have collected from ratepayers most of the $2.6 billion it will invest in modernizing the Chicago-area power grid through annual rate hikes Illinois lawmakers authorized last month.

The so-called Rite Line project, which ComEd is building with units of Ohio-based American Electric Power Co. and Iowa-based MidAmerican Energy Co., was approved Oct. 14 by the Federal Energy Regulatory Commission. The project also needs approval by grid operator PJM, which will determine how the costs are apportioned among utility customers in the affected areas.

The line would run from Byron, southwest of Rockford and the site of the second-largest Exelon nuclear station in Illinois, to the Indiana-Ohio border.

In a statement, Exelon says the line will bolster reliability while permitting wind farms in Illinois and Indiana to deliver their power to population centers.

“We do not expect that the costs of the entire project will be borne solely by ComEd customers,” the company says, adding that it can't yet estimate the impact on ComEd electric rates.

“Our state already benefits from an oversupply of inexpensive power,” Exelon adds. “We believe any additional power coming into Illinois from planned wind projects in the upper Midwest can and should be moved eastward for reliability reasons, which will not unduly impact Illinois power prices.”

PRICE SPIKES

Whatever happens with new wind power in the future, Rite Line will cause local power prices to rise more than they would otherwise, experts say. The amount of the increase will depend on market prices when the line is completed in 2018.

“When you relieve a constraint, where the prices were high they go down, and they go up on the low-cost side,” says Paul McCoy, president of Bethesda, Md.-based power-transmission development firm Trans-Elect Development Co.

Exelon's Mr. Crane, slated to succeed Mr. Rowe as CEO next year, told Maryland regulators the company's executive committee decided in June 2010 not to go forward with Rite Line precisely because it would harm ComEd ratepayers. According to an internal company document summarizing the meeting, which was made public as part of the Maryland proceeding, “John Rowe said that the line appears attractive to Exelon but not necessarily to ComEd customers since it raises ComEd rates and lowers rates in AEP (Ohio).”

But just five months later, Exelon announced plans to go forward with the project. What changed?

In its statement, Exelon says federal regulators made clearer that grid operators' allocation of costs of such transmission lines to ratepayers “should be . . . based on the benefits received from the line. We are continuing to evaluate the process but feel like this is a step in the right direction.”