“The proposed energy legislation being circulated will be the largest rate hike on consumers and businesses in history,” a coalition of business organizations warned in a recent open letter to Pritzker. (Read the letter below.)
How can this happen? It’s just the way public policy is made in Illinois. Powerful interest groups haggle among themselves and send the bill to everybody outside the circle of influence. Even influential groups like the Illinois Manufacturers’ Association and the Illinois Retail Merchants Association say they were shut out of meaningful negotiations.
In this case, seats at the table belong to energy giant Exelon and its Commonwealth Edison subsidiary, environmental groups, labor unions and green power companies. A final bill would have something for each of them.
Exelon has secured commitments from legislators for $700 million in subsidies for three of its nuclear plants, on top of $235 million in annual support that ratepayers already shell out to prop up two other Exelon plants. The subsidies also please unions because Exelon has threatened to close the plants if lawmakers don’t approve the payments. Environmentalists, for their part, are looking forward to $200 million a year to finance wind and solar power generation projects.
Altogether, the legislative package under consideration would add $4 to $5 per month to ComEd customers’ bills. Supporters call it a fair deal, arguing that nuke and renewable subsidies benefit customers by ensuring stable power supplies and helping Illinois meet its carbon-reduction goals. Union-aligned legislators, of course, tout the jobs saved by keeping nuclear plants open.
What about customers? Do they think the benefits justify the costs? And how do they feel about subsidizing Exelon plants after ComEd admitted to a massive bribery campaign in Springfield that gave the utility more power to raise rates?
In most transactions, customers’ opinions matter a lot. Customers usually can walk away if they don’t like the terms of a deal.
Electricity customers can’t walk away. If you want power to run a home or business in Northern Illinois, you have to deal with ComEd. And when state legislators authorize new utility charges, you have to pay.
Pritzker makes much of the fact that his proposals would end the ratemaking regime that ComEd obtained by bribery. So-called “formula” ratemaking approved by Springfield a decade ago reduced regulatory oversight of ComEd rates. ComEd’s charges for delivering power climbed 37 percent between 2011 and 2019, according to a 2020 report on formula rates by consumer advocacy group Illinois PIRG.
Formula ratemaking has to go, but should be replaced by something better for customers. Illinois PIRG warns that Pritzker’s new ratemaking proposal could lead to even higher rate hikes than ComEd obtained under the formula system.
If you think alarm over possible rate hikes is the reason legislators haven’t agreed on final legislation, you need to brush up on Illinois politics. The holdup is a squabble between enviros and labor unions over phasing out fossil-fuel burning plants. The former want a faster phase-out, and the latter want a slower one.
Something tells me they’ll work it out. It’s easier to reach agreement when somebody else is picking up the tab.
Lawmakers may believe they’ve done their jobs if they reach a deal that satisfies each powerful interest group with a stake in energy legislation. But their job is to make good policy for the entire state of Illinois. A bill that drives up electricity costs in Illinois is bad policy.
Relatively low electricity prices have been an economic advantage for Illinois. Springfield politicians appear willing to horse-trade away that advantage. Higher power costs would give residents and businesses another reason to leave the state. They already have too many.