CUB Challeges New ComEd Plan
To Increase Power Costs
Warns of “triple whammy” as consumers face $963 million increase from three separate rate hikes
CHICAGO, Oct. 18, 2005 — As it seeks state approval for plans that would
raise electric bills by at least 20 percent, ComEd is quietly pushing a
separate proposal before federal regulators that would boost rates by an
To Increase Power Costs
Warns of “triple whammy” as consumers face $963 million increase from three separate rate hikes
| Contact: For more information call Pat Clark at 312-263-4282. Click here for an Adobe Acrobat version of the CUB news release, letter to ICC and report summary. Download the complete report, An RPM Case Study: Higher Costs for Consumers, Windfall Profits for Exelon, produced by Synapse Energy Economics Inc. |
In addition to higher rates for consumers, the new federal rate hike plan would produce windfall revenues for Exelon of between $390 million to $1.2 billion, according to an expert study commissioned by CUB. The study, along with a formal objection to the plan, will be filed by CUB with the Federal Energy Regulatory Commission (FERC) on Wednesday. The consumer group also is asking the Illinois Commerce Commission (ICC) to oppose the plan.
Deemed the Reliability Pricing Model, the proposal would increase the wholesale rates utilities, such as ComEd, pay to reserve capacity at power plants run by generators, such as Exelon.
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PJM Interconnection, the regional power grid operator for ComEd’s northern Illinois service territory, filed the wholesale rate increase in August, despite the fact that a majority of the organization’s members, including CUB, opposed it. Exelon and ComEd, also PJM members, support the plan.
Akin to an air traffic controller, PJM runs the electric transmission grid serving 45 million people from the east coast to northern Illinois. It also operates the regional wholesale power market, from which ComEd purchases power.
At the urging of large power producers like Exelon, PJM has concluded that current market prices for generating capacity are too low and need to be propped up artificially by regulators. So, PJM has asked FERC to approve an increase in what are known as “capacity payments,” the charges ComEd and other utilities pay to reserve capacity from power plants for their customers.
These capacity charges, along with the cost of the power itself, make up the energy cost that gets passed through to customers on electric bills.
“In Illinois, all we ever hear from ComEd is that we have to trust the market and let the chips fall where they may, even if it means unlimited rate hikes for consumers,” Kolata explained. “But when the market starts to generate lower prices, as the capacity market has, the company sings a different tune and asks federal regulators to step in and approve a big rate increase.”
Although PJM and Exelon claim the wholesale rate increase is needed to ensure future reliability of the electric system, the plan imposes no requirements that generators invest the additional revenues they earn in new power plants. The result would be a “huge wealth transfer from ratepayers to owners of existing generation,” like Exelon, according to the study, conducted on behalf of CUB by Synapse Energy Economics, Inc. The Synapse study found that the revenues associated with this scheme would be substantial.
“Exelon alone stands to reap windfall revenues of as much as $1.2 billion under this selfserving plan,” Kolata said. “And if ComEd’s auction is approved, those extra revenues for Exelon will come straight out of consumers’ pockets.”
In addition to the wholesale power increase, ComEd is pushing a controversial auction plan and a $317 million increase in delivery service charges, which the utility predicts will increase bills by at least 20 percent. The wholesale power increase pending at FERC would translate into a 17 percent boost on ComEd bills, for a total rate hike to consumers of 37 percent after a state-mandated electric rate freeze expires next year.
The ICC is expected to decide the auction case in January. The delivery services case will conclude next July and FERC could rule in less than six months.
CUB is a nonprofit statewide utility watchdog organization created by the state legislature to represent the interests of residential and small-business utility customers. For more information about CUB and its efforts to protect consumers over the last 20 years, call CUB’s Consumer Hotline at 1-800-669-5556 or visit www.citizensutilityboard.org.
Releated articles
Chicago Tribune - October 19, 2005Electric utility industry pushing for big rate hike
By Robert Manor
Chicago Sun-Times - October 19, 2005
CUB fighting power plant funding change
By Mary Wisniewski
Daily Herald - October 19, 2005
Power rate increase proposal criticized
By Anna Marie Kukec
Belleville News-Democrat - October 19, 2005
CUB warns proposal before feds could raise power rates
by Mike Colias
ABC7chicago.com - October 18, 2005
CUB warns proposal before feds could raise power rates
Video clip on site
WQAD - October 18, 2005
CUB warns of federal rate-hike proposal