ComEd rates are set to surge
By Steve Daniels, Crain's Chicago Business
Saturday, May 18, 2013
—Chicago-area consumers shouldn't get used to the big savings they're seeing on their electric bills.
In just a few weeks, rates for Commonwealth Edison Co. customers will fall significantly. But in 12 months those prices are projected to soar about 23 percent, right back to where they are today. And the same will be true of most consumers who switched to alternative suppliers to ComEd, either on their own or when their local governments contracted with those firms on their behalf.
The two major reasons: ComEd has filed for a 17 percent increase in its delivery rates, set to take effect Jan. 1 and paid by all consumers, whether they buy energy from ComEd or an outside supplier. And a key component of the price all households and businesses pay for energy—a charge to reserve capacity at power plants operating in the regional grid that includes Chicago—will soar in June 2014 under terms of a previously held auction among power generators.
The news may be surprising to consumers, many of whom only now are enjoying the fruits of a collapse in wholesale electricity prices that took hold more than a year ago amid historically low natural gas costs and slack demand for power.
For most Chicago residents, electric bills dropped noticeably in March thanks to the Emanuel administration's deal with Chicago-based Integrys Energy Services to provide electricity to nearly 1 million city customers who previously bought from ComEd. The average monthly electric bill for the 1.1 million suburban households still buying power from ComEd will fall to $67 from $81, but not until next month.
ComEd agrees that rate relief will last only 12 months. But it argues that grid modernization investments it's making under the 2011 "smart grid" law are worth the cost. "The total (electric) bill is going to remain at or below what it currently is," says Thomas O'Neill, ComEd senior vice president for regulatory and energy policy. "And that's why it's a good time to invest in the grid."
Interestingly, the projected 23 percent increase in 2014 is close to ComEd's 24 percent hike in 2006 that provoked a firestorm in Springfield, culminating in a $800 million customer refund by ComEd and Chicago-based parent Exelon Corp. and the creation of the Illinois Power Agency, which supplanted ComEd as the buyer of power on behalf of the utility's customers.
No one expects a similar reaction next year, however, since the increase is the result of a legislatively approved infrastructure program and a power-capacity charge that's ultimately the responsibility of federal energy regulators.
How is it possible to foresee ComEd rates a year from now?
First, ComEd recently filed for its delivery increase. The Illinois Commerce Commission could reduce it, blunting the hike. But a bill overwhelmingly passed by the Legislature in March ties the regulators' hands as to how much they can trim ComEd's request.
Second, capacity charges in PJM Interconnection, the regional power grid stretching across all or parts of 13 states from Chicago to North Carolina, are slated to rise 350 percent beginning in June 2014. Those charges, embedded in the energy prices paid by all customers in PJM, will raise ComEd's 5.5-cents-per-kilowatt-hour energy price to roughly 7 cents per kilowatt-hour for typical residential customers, according to Mark Pruitt, former Illinois Power Agency director and now a consultant to the city of Chicago and other municipal governments buying electricity on behalf of constituents.
Put the two increases together and total rates to be paid by ComEd customers will jump 23 percent from 9.7 cents per kilowatt-hour beginning this June to 11.9 cents in June 2014.
Many communities, including Chicago, will reopen their power deals a year from now, and if they can't beat ComEd's price, they may choose to send their residents back to the utility. That makes it difficult for the Illinois Power Agency to plan power purchases for the coming year; as of now, it has more than enough power under contract to serve ComEd's relatively small customer load, according to Anthony Star, the IPA's acting director.
"There's real uncertainty out there," he says.
A spokeswoman for Integrys, which supplies the city, says, "It's too early to speculate."