Public ventures: Getting around ComEd’s rate dilemma
revised and reposted 10-29-2007 2:03 a.m.
original post Monday, August 6, 2007, 8:45 p.m.

Part two of a two-part essay
Previously: a short history of utility monopoly

We have a seeming dilemma on electric rates in Illinois. The key word is ‘seeming,’ of course.

ComEd demands higher electric rates because the parent company it created to absorb its generating plants, Exelon Corp., is raising the price of electricity to it so it can make more money. ComEd claims this is absolutely necessary or it will go bankrupt. As if Exelon would really ever let its subsidiary go out of business (if it did, it wouldn’t have a public to which to sell the power it generates … unless it wanted to sell that power at premium rates to the rest of the country instead, right? Leaving Illinois energy users up a creek. Hmmmm. There’s a thought).

After much struggle between the state’s legislative Powers That Be, Mike Madigan and Emil Jones, a shove from Gov. Rod Blagojevich, and two cents from Mayor Daley and the Citizens Utility Board, there is a compromise of sorts. Madigan wanted a continued rate freeze and price rollback from the start of this year, when rates jumped. Jones wanted to allow ComEd a much higher rate increase, even if phased in over several years. CUB wanted even lower rates, being rightly leery of the mechanism by which Exelon was able to produce the ‘need’ for higher rates. What we have instead are rebates to rate payers for a limited period, along with phased-in rate increases – if the governor signs the bill. But none of this will keep electric rates from getting unbearably high in the future. It’s just a stalling technique.

Rate payers, also known as voters, are caught in the middle and will ultimately pay one way or the other. Worse, they’re not sure whom to believe. Yet everyone knows that utility rates never (well, almost never) go down once they’ve risen. Consumers feel used, suspicious, and resentful – and given ComEd’s history, well they should. But they also don’t see a way around eventually paying higher rates, other than pressuring politicians to prevent it. That only works for so long.

Maybe the answer is twofold: first, to once more have public utilities with their own ability to generate power and to remove the monopoly advantage from those that don’t – and by this, I mean truly public utilities, ventures owned by the voters and financed with municipal bonds in addition to rate revenues – and second, to ban lobbying by all public utilities and their parent companies, whether municipally owned, privately owned, or publicly traded (that won’t be enough to keep energy companies from unduly influencing government, but it’s a start; for more then that, we need campaign finance reform, and that’s another subject).

There are some existing municipal energy utilities, those owned by individual towns and cities. Mayor Daley himself threatened to dump ComEd and consider municipal power production several years ago, the last time there were multiple blackouts during a particularly hot summer, an embarrassing number of heat-related deaths as a result, and some really bad press about ComEd’s lousy record of maintaining its aging equipment and transmission system. It’s not like a public power production venture is a completely new idea.

In today’s economic climate, such new municipal or regional start-ups would likely be prohibitively expensive; yet upgrading existing ones is also expensive. Six of one, half a dozen of the other. Consumers would pay either way, but over the long run, they might pay considerably less with a public venture than with ComEd. Especially if they can defray some of their own usage costs by generating part of their own power. The Center for Neighborhood Technology and environmental organizations have been pushing the idea for years, but technology is finally becoming reasonably enough priced for consumers to be able to really consider it.

So perhaps it’s time to consider a statewide or regional energy cooperative model to compete with ComEd, one that would combine local ownership with shared funding and shared power generation among many communities within the state using newer high-tech methods, including wind farms, solar energy, cutting-edge pollution controls and ’clean’ coal plants.

Such a co-op could also encourage individual consumers to invest in their own active power generation tech and passive conservation mechanisms by granting energy credits that would cut the cost of any power those consumers did buy from the co-op grid. Consumers could also lower their own rates by selling any excess power their home systems created back to the co-op grid. Further, because taxes would have to help cover any costs for excess power the co-op had to buy on the open market, consumers and business users – who are also voters – would have a direct incentive to lower their energy use. Meanwhile, consumer watchdogs would continue to scrutinize the utility co-ops just as they do now. And voters and media will still have to put pressure on the Emil Joneses of the world to keep them from selling out to the remaining private energy companies in exchange for campaign contributions.

Would the new municipal or regional energy co-ops be able to generate all their own electricity? Not at first, and perhaps not for many years; but that doesn’t mean they couldn’t generate a significant amount of energy that would end up lowering overall costs to consumers, or that consumers couldn’t significantly lower their own energy use – and, thereby, overall local demand – by having significant incentives to produce some of their own energy and selling back their excess. Remember, sunlight and wind are free, so why should we pay ComEd and other energy companies higher rates for energy we can partially produce ourselves? Why let ComEd and its ilk corner the market on solar and wind power when those belong to everyone?

ComEd and other electric utilities do need competition, it’s true – but not from the likes of each other, because all of them are vulnerable to the same corporate machinations that have jacked up ComEd’s energy costs. The only people who benefit from Exelon’s shenanigans are Exelon shareholders, while the rest of us pay the costs, which will be even more outrageous in the future unless a truly publicly owned venture steps in to challenge the old electric utilities.

Perhaps it’s time to once again make a public investment for the public good, because the robber barons have gotten too greedy. Eliminating stockholder-owned energy giants may be neither feasible nor desirable, but they’ve gotten too big and bloated and are too beholden to Wall Street to be technologically innovative. They’re too focused on share price and quarterly dividends. Time for energy producers who don’t have to answer to that and can be more inventive.

Yes, I know what you’re thinking: this is what NASA used to be, an aggressively creative public trust, and see what it’s become now – inept, careless, cheap about quality, afraid of its own shadow; space exploration is better off in less bureaucratic, more flexible private hands. Maybe, in that instance; maybe not. The truth, however, is that neither the market, which always moves towards profits and eliminating the competition, nor government, which can get bloated or become victim to lobbyists, budget cuts, or enraged voters, does well by itself over the long term. Both corporations and governments can become hamstrung by bureaucracy and stodgy in the face of needed change; neither is immune. When it comes to critical public services, be they defense, basic scientific research, space exploration, or providing power, the market and the government need to keep each other honest. They need to keep challenging each other. Neither should dominate if the nation is to benefit, and neither government nor consumers should be captive to corporations where public services are concerned.

ComEd and the market are failing us on power generation. Time for some innovative public intervention.