Illinois Breaking News
ComEd Backs off Rate Hikes Critics Say are Hidden in Buyout Proposal
11/21
Chicago-Based Utility Exelon to Meet with Illinois
Governor Over Rate Hike 11/17
Commonwealth Edison Backs Off Rate Hike for Chicago, but not Illinois
Power 11/12
Consumer Groups Ban Together to Protest Rate Hike Legislation 10/28
CUB Charges Peoples Energy with Misleading Consumers, Asks ICC To
Halt Illegal Marketing, Fine Company 10/2
State Regulators Cut Utility's Refund to Customers 8/21
Nicor Gas Claims Illinois Consumers Owe $7 Million 8/8
Advocate Group Seeks $100 Million Refund for Peoples Gas Customers
8/7
ComEd Backs off Rate Hikes Critics
Say are Hidden in Buyout Proposal
(November 21) After saying for weeks that future rate
increases were needed for a multibillion-dollar purchase of a downstate power company,
ComEd officials said on Nov. 17 that customers shouldn't have to pay more.
The about-face came after Gov. Rod Blagojevich came out against
the plan ComEd and its parent company are pushing in Springfield to speed up acquisition
of Decatur-based Illinois Power.
"If they feel that this is the only way they can buy
Illinois Power, then evidently they shouldn't buy Illinois Power," Blagojevich said
Monday morning of rate hike provisions.
Within hours, the companies unveiled a new plan they said no
longer directly links the Illinois Power purchase to rate increases for either Illinois
Power or ComEd customers.
Instead, state regulators would review the merger within nine
months, rather than the usual 11 to 14 months. The companies also vowed to invest more in
downstate power reliability and renewable energy, and eliminate fewer jobs.
However, consumer groups and rival power companies said the
latest plan merely does a better job of hiding rate hikes consumers will face in 2007 if
the deal becomes law.
By law, rates are frozen through 2006. The new plan would allow
ComEd to increase rates now for when the freeze ends, but consumer advocates say energy
prices should be going down in 2007.
"A rate hike is a rate hike is a rate hike - whether by
front door or the back door it is still a rate increase to the citizens of Illinois,"
said Iris Johnson, president of the NAACP's state conference.
The central issue of contention is how ComEd, owned by Exelon,
would go about buying power from other Exelon affiliates. Critics say consumers are likely
to lose if Exelon's right hand is selling power to Exelon's left hand and then passing the
costs on to customers. They say it will keep rates high at a time when they should drop.
Source: Daily Herald (Arlington Heights)
Chicago-Based Utility Exelon to Meet with Illinois Governor Over Rate
Hike
(November 17) Exelon Corp. executives plan to meet with
Gov. Rod Blagojevich in a bid to get him to change his mind about his opposition to a
proposed Downstate electricity rate hike.
The Chicago-based energy company says the rate hike "is
essential" to its proposed $2.2 billion acquisition of Illinois Power Co.
The state legislature is in the final days of the fall veto
session.
Blagojevich on Thursday signaled that he likely would veto such a
bill if passed by the legislature.
Senate President Emil Jones (D-Chicago) vowed this week that he
would not call the ComEd bill for a vote until Blagojevich took a stand on the issue.
ComEd on Monday dropped its request for a rate hike for its
Chicago-area customers in an effort to get the bill passed.
"They've got a long way to go to convince me that they need
a rate increase for central Illinois," Blagojevich said. "It's good they took
the one off the table for Chicago. That was a non-starter, but I don't see why central
Illinois consumers should be treated any differently."
The bill would provide the Illinois Commerce Commission with
authority to impose a four-year rate increase, from 2007 through 2010, for Illinois Power
customers. The bill still contains language that would allow it to seek a rate increase
for its Chicago-based utility customers on the same terms.
Source: The Chicago Tribune
Commonwealth Edison Backs Off Rate Hike for Chicago, but not Illinois
Power
(November 12) Commonwealth Edison Co. is backing off its request
for a long-term rate hike for its customers as part of its proposed $2.22 billion
acquisition of Illinois Power Co.
But ComEd, a unit of Exelon Corp., is still pressing for a
four-year rate increase for Illinois Power customers as part of the proposed merger,
officials said on Nov. 10.
Pamela Strobel, Exelon's executive vice president and chief
administrative officer, said ComEd officials worked through the weekend to craft a
proposal they believed would win state lawmakers' approval.
In an interview, Exelon's chairman and chief executive, John
Rowe, said the proposed bill, with the rate increase, would reinvigorate Illinois Power,
whose credit rating sank below investment grade under the ownership of Houston-based
Dynegy Inc. "You can almost guarantee that sick utilities will over time be
associated with reduced reliability, it just happens," Rowe said. "To make
infrastructure improvements, you need capital, and it doesn't come in small
quantities."
The bill contains language that would allow ComEd to seek a
similar rate increase for ComEd customers from the Illinois Commerce Commission, using the
same special criteria it would have applied to determine whether Illinois Power's rates
were set fairly.
"While the language has improved, the bill at its core
remains objectionable," said Martin Cohen, executive director of the Citizens Utility
Board. "Any decision about Illinois Power rates will be a precedent for the ComEd
case. What's more, it still requires an Illinois Power rate hike or the company will walk
away from the deal," he said.
"The commission still will be making a rate decision in the
Illinois Power case, knowing that if they don't give the company what it wants, there will
be no merger," Cohen said. "The commission is still held hostage by the
company."
ComEd, the state's largest electric utility, had said its ability
to purchase the financially troubled Downstate electric and natural gas utility from
Dynegy hinged on getting a rate hike of up to 9 percent for customers of both Illinois
Power and ComEd.
Source: Chicago Tribune
Consumer Groups Ban Together to Protest
Rate Hike Legislation
(October 28) The Citizens Utility Board (CUB) has joined
consumer groups from across the state to kick off a campaign to defeat rate hike
legislation being pushed by ComEd -- a plan that could cost ComEd and Illinois Power
customers over $2 billon in higher rates through the end of the decade.
CUB is a nonprofit, statewide utility watchdog organization
created by the Illinois legislature to represent the interests of residential and
small-business utility consumers. CUB Executive Director Martin Cohen disputed ComEd
claims that the bill would allow it to protect jobs and bail out Decatur-based Illinois
Power Co., the downstate utility owned by Dynegy that ComEd wants to buy.
"This bill would gut key consumer protections that have been
in place in Illinois for 80 years and allow ComEd to lock in a rate increase it otherwise
would have no chance of winning," Cohen said.
Joining in the campaign against the legislation is every major
consumer group in the state, including AARP, Citizen Action/Illinois, the Environmental
Law and Policy Center of the Midwest, and Illinois Public Interest Research Group.
ComEd is seeking quick approval of the far-reaching legislation
when lawmakers reconvene in November for the six-day veto session.
The legislation would allow state regulators to approve a
long-term rate increase plan at the same time the agency considers -- in a rushed
six-month proceeding -- whether to approve ComEd's takeover of Illinois Power. Along with
rushing ICC review of the buyout, the bill guts the standards in current law that require
rates to be "just and reasonable." Instead, the legislation would require only
that the new rates promote "rate certainty," no matter how high the prices are.
And, the rate hike would be locked in for four years.
ComEd has acknowledged it plans to seek a rate increase if the
law is approved but has said it will be a single-digit increase. Assuming ComEd seeks no
more than a 9 percent hike, rates for ComEd and Illinois Power customers would increase a
total of $520 million a year, or $2.1 billion over four years.
The rate hike would begin in 2007 and last through 2010.
Under current law, rates are frozen until 2006. At that time,
absent new legislation, the Illinois Commerce Commission (ICC) would be required to set
rates based on the standards and protections now in the law and ComEd's profits would be
limited to a reasonable level.
Source: Citizens Utility Board
CUB Charges Peoples Energy with Misleading Consumers, Asks ICC To
Halt Illegal Marketing, Fine Company
(October 2) In a complaint filed with the Illinois Commerce
Commission (ICC) on Oct. 1, the Citizens Utility Board (CUB) charged Peoples Energy
Services with misleading consumers into signing up for a plan that offers a "fixed
price" for natural gas until 2005. CUB said the company's marketing of the plan
violates the state's Consumer Fraud Act. The complaint asks the agency to order the
company to stop the misleading marketing of the offer, honor the advertised price and
allow customers who have already signed up to cancel the contract without a penalty.
"Peoples Energy is using sales tactics usually associated with fly-by-night
companies," CUB Executive Director Martin Cohen said. "This type of behavior is
not just dishonest, it's illegal and the ICC should put a stop to it immediately. They're
not peddling magazine subscriptions here, they're selling a vital commodity that every
household in the region depends on."
The company, which is an unregulated affiliate of Chicago-based utility Peoples Gas, made
the offer in a letter sent to consumers earlier this month. The letter warns customers of
impending high natural gas prices and offers to
lock in a price of 62 cents per therm for two years.
But the two-year contract customers are asked to sign contains an escape clause that
allows the company to cancel the contract or raise the price at any time. However,
consumers who want out of the agreement must pay a
"termination fee" that could total several hundred dollars, depending on when
they cancel it.
The company's marketing of the plan cautions that only the first 2,000 customers who
respond to the offer will get the fixed price. But a Peoples Energy spokesperson said
publicly that the company may offer it to more than 2,000 customers. Such a false claim,
according to CUB's complaint, also violates the Consumer Fraud Act.
By using the same name and logo as Peoples Gas, consumers are misled
into thinking the offer comes from the utility, which is regulated by the ICC. However,
Peoples Energy Services is an unregulated company, whose rates and
offerings are not overseen by the commission.
Under state law, the ICC does have authority to ensure that the marketing materials of
alternative gas suppliers like Peoples Energy Services "adequately disclose the
prices, terms and conditions" of the products or services being offered. The Peoples
Energy materials violate this mandate, CUB's complaint concludes.
In addition to halting the misleading marketing of the plan, CUB is asking the ICC to fine
the company $100 per solicitation, up to $1 million, and to rule on the case in an
expedited proceeding.
CUB is a nonprofit, statewide utility watchdog organization created by the Illinois
legislature to represent the interests of residential and small-business utility
consumers.
Source: CUB
website
State Regulators Cut Utility's Refund
to Customers
(August 21) The Illinois Commerce Commission (ICC), in an
apparent about-face, sliced in more than half the amount of money that it said Peoples Gas
Co. should be required to refund customers. The new estimate, released Monday, was roughly
$30 million. But a draft of the ICC testimony obtained by the Tribune last week calculated
that Peoples Gas should refund customers twice that amount, or $63 million.
The charges against Peoples Gas stem from the winter of
2001-2002, when Chicago-area residents paid gas bills that averaged $1,200 for the season,
more than twice what they had been in the previous year.
Last week, the City of Chicago, the Citizens Utility Board and
the Illinois Attorney General revealed the results of independent investigations into the
way the Chicago-based utility conducted its gas purchases for that winter. The city said
Peoples Gas' failure to hedge energy costs forced consumers to pay an extra $230 million,
while CUB found an array of alleged gas purchase transgressions cost customers roughly
$110 million.
All three organizations, in addition to the ICC staff, found that
Peoples Gas had entered into "sweetheart" deals with Enron Corp. and improperly
leased its gas storage units during the summer, in effect lifting gas prices.
One person familiar with the case said that ICC staffers, who
prepared Monday's report and who are charged with publishing objective analysis, had been
pressured to go easy on Peoples Gas. When asked if the staff had been pressured to change
its recommendation, ICC executive director Scott Wiseman declined to comment.
It will be difficult to figure out exactly how much Peoples Gas
owes consumers. Part of that is because everyone uses different math. The discrepancy
between the figures CUB and the city came up with last week, for instance, is because the
two organizations--both partners in the effort to recoup gas bills--relied on different
methodology.
Peoples itself said in confidential settlement negotiations that
it should only have to pay $12 million.
Source: Chicago Tribune
Nicor Gas Claims Illinois Consumers Owe $7 Million
(August 8) Despite admitting that it overcharged consumers by $20
million, Nicor Gas now says consumers owe the utility almost $7 million. The company
disclosed the amount it believes it is owed in an August 5 filing with the Illinois
Commerce Commission (ICC). Nicor's consumers live in the northern third of Illinois.
A spokeswoman at the unit of Naperville-based Nicor Inc.said
spread among 2 million customers, the charge could amount to about $3.50 per customer.
The Securities and Exchange Commission and the U.S. attorney's
office have been investigating the gas company since a whistleblower last year alleged
that the company had engaged in fraudulent accounting in its unique natural gas purchase
plan, known as the performance-based rate plan. Nicor got approval for the rate plan in
1999, which allowed the company to split savings it made on gas purchases with consumers.
The whistleblower alleged that the company used accounting
techniques to tap into an inventory of cheaper gas. Purchased for 3 cents a therm, the gas
had been on its books from the 1950s, and consumers should have been entitled to have the
complete savings from the stored gas passed on to them, according to the Citizens Utility
Board (CUB), an advocacy group.
Prior to an investigation by former U.S. Atty. Scott Lassar,
hired by the board of Nicor Inc., Nicor Gas reported that it had saved $54 million to be
shared by consumers and the company over the first two years of the program, 2000 and
2001. After adjusting for accounting and other errors pointed out by Lassar, Nicor then
said it owed consumers $20.6 million for the two years.
For the year 2002, the company now says it saved $53.7 million on
its gas purchases, and was entitled to recoup $26.8 million--about half of the
savings--from consumers. That would mean consumers still owe the utility almost $7
million, including interest.
"It seems that no matter what Nicor does, it can come up
with experts that rationalize the company's actions in ways that benefit the
company," said CUB's director of litigation Robert Kelter. He noted that the $20.6
million does not include other findings of the Lassar report that would have required the
company to give even more money back to consumers. He also questioned whether the 2002
figure should be considered savings on purchases.
Source: Chicago Tribune
Advocate Group Seeks $100 Million Refund for Peoples Gas Customers
(August 7) Peoples Energy entered into improper business
arrangements, manipulated its storage gas and was lax in its efforts to minimize the
record-high gas prices during the winter of 2000-2001, costing consumers at least $109.5
million, or 14.5 percent, in higher gas costs that should be refunded, according to the
Citizens Utility Board (CUB). CUB is a nonprofit, statewide utility watchdog organization
created by the Illinois legislature to represent the interests of residential and
small-business utility consumers.
Speaking at a news conference, CUB Executive Director Martin
Cohen said his group is filing testimony with the Illinois Commerce Commission (ICC)
detailing the overcharges. CUB also will be asking the agency to order refunds for
consumers, to be paid on heating bills for the 2004-2005 winter.
The ICC currently is reviewing the company's gas purchases for
the winter of 2000-01, when gas prices skyrocketed to nearly $1 per therm, causing most
customers' winter heating bills to double. As part of that review, CUB commissioned two
experts to study the company's purchasing practices.
The first analysis, conducted by Exeter Associates Inc., of
Columbia, Maryland, found that Peoples Energy engaged in improper purchasing practices and
entered into contracts that raised gas costs for consumers by a total of $56.3 million.
The second study, conducted by CR Planning Inc., found that the
company failed to prudently manage its gas supply and to minimize the huge price spikes to
consumers in the winter of 2000-2001. According to the study, the company should have
"hedged" at least 20 percent of its gas supply during the winter, a move that
would have saved consumers $53.2 million.
Hearings in the case will be held in December, with an ICC ruling
expected sometime next year.
Source: Citizens Utility Board
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