Power rate rollback would be a mistake

Chicago Sun-Times
May 10, 2007

Since January, when a nearly decade-long freeze on electric rates expired and power bills soared, lawmakers have been getting an earful from angry residents, particularly in Downstate areas where the increase was much more severe. They have responded with a serious push to roll back rates to their frozen levels. It sounds simple and alluring, but it would be a bad mistake.

To understand the debate you must return to 1997, when the Legislature decided to deregulate the power industry. Rates were rolled back 20 percent and frozen for what turned out to be nine years. ComEd got out of the business of generating power and became a business to deliver it. The expectation was that by the end of the freeze, rival power generating companies would be competing for customers, and market forces would be keeping prices low.

But competition for residential customers never developed. The problem was the frozen rate was so low, competitors couldn't beat it — so they stayed away. With the freeze set to expire, but without a competitive market, ComEd got the OK to introduce a measure of competition by buying power in a reverse-auction process, in which several different entities bid to supply the region's power needs. As a result, ComEd's 2007 rates, on average, are about 22 percent higher than in 2006. That sounds like a big jump, until you remember that rates were rolled back in 1997 and then frozen for nearly a decade so that today's increased charge is the same or lower than 1995. Much of the anger in the Legislature, however, comes from Downstate, where a similar process for Ameren resulted in bills that are an average of 55 percent higher.

The House passed a bill to return rates to their frozen levels for Ameren and ComEd customers. The Senate approved the Ameren portion of the freeze, and would have also included ComEd if not for some trickery by Senate President Emil Jones (D-Chicago). Jones is an opponent of the freeze whose ties to ComEd — it has a contract with his stepson and its officials raised money for him — have prompted some critics to question his motives, but we don't.

But Jones is on the right side in this debate. Refreezing the rates will do nothing to encourage competition, but the auction prices stand a much better chance. The freeze threatens to put off competition indefinitely. And lawmakers who support a freeze are telling ComEd it must buy power for more than it can sell it — remember, it no longer generates its own power. ComEd has promised to sue if the freeze passes, and it stands a good chance of winning. ComEd has offered $64 million in rate relief to aid those who can least afford the higher rates. CEO Frank Clark candidly admits the program is largely an attempt to head off a freeze. Lawmakers should stop trying to turn back the clock, accept ComEd's relief plan and let competition takes its course.

« see more