Watchdog expects total reductions
recommended by consumer advocates to eclipse $1 billion
CHICAGO, May 23, 2023
/PRNewswire/ -- Commonwealth Edison's proposed four-year electric
rate hike should be cut by at least $914.5
million, or more than 60 percent, the Citizens Utility
Board (CUB) said Tuesday, citing expert testimony it filed in the
rate case.
CUB Executive Director David
Kolata said the watchdog expects to support additional
reductions uncovered by the Illinois Attorney General's Office and other
parties to recommend that ComEd's proposed increase get slashed by
a total of more than $1 billion.
"It's immediately apparent that the company is pushing for an
excessive profit rate for its shareholders," CUB Executive Director
David Kolata said. "ComEd has to
maintain its system, but it never deserves a blank
check. We urge state regulators to make deep cuts in ComEd's
rate-hike proposal."
Kolata asked ComEd customers to visit
CUBHelpCenter.com to sign a petition to the Illinois
Commerce Commission (ICC) against the proposed increase.
On Jan. 17, ComEd filed for a
four-year, $1.5 billion rate hike.
The hike would increase ComEd delivery rates by an average of
$4.25 a month each year, for a
cumulative increase of about $17
a month by 2027.
In 2020, ComEd became embroiled in a corruption scandal
involving the passage of legislation that led to close to
$1 billion in rate hikes over the
last decade, including $45.8 million
in 2022 and $199 million in 2023.
Since 2020, ComEd's parent company has made about $5.6 billion in profits.
The Climate and Equitable Jobs Act (CEJA) implemented reforms,
creating a more transparent rate-setting system that gives state
regulators more authority to oppose rate hikes and challenge
the company's push for a higher profit rate for its
shareholders.
ComEd and other major Illinois
gas and electric utilities are pushing for a record six rate hikes
totaling $3.7 billion in 2023. In
response to this unprecedented barrage, several parties are
challenging increases, including the Illinois Attorney General's Office,
Environmental Defense Fund, Illinois PIRG and CUB.
In the ComEd case, CUB, the Illinois Industrial Energy Consumers
(IIEC) group, Environmental Defense Fund, Community Development
Corporation of Pembroke-Hopkins
Park and People for Community Recovery partnered to
commission expert testimony. The analysis, filed late Monday, came
from Brubaker & Associates, Inc., a Missouri-based consulting firm that
specializes in utility regulation, and the environmental
sustainability consulting firm Energy Futures Group out of
Vermont. The testimony makes
several recommendations to slash the rate hike by nearly a billion
dollars.
Return on Equity. ComEd has proposed an excessive
jump in its "return on equity" (ROE)—or profit rate for
shareholders—from about 7.85 percent to 10.5 percent, and then
rising to 10.65 percent by 2027.
That's the highest of any electric utility in Illinois. CUB argues for a more reasonable 9.4
percent ROE, which would reduce the rate hike by $570.4 million.
In the rate-setting process, ROE is the most important component
of a utility's "rate of return," which is the rate at which the
utility recovers the cost of financing physical assets, such as
electric meters, substations and wires.
Capital Structure. CUB's expert testimony also found
problems with another key component of rate of return: "capital
structure"—basically how it finances infrastructure projects.
ComEd's proposed "common equity ratio"—how much of the utility's
financing comes from issuing stocks—was too high, CUB argued. The
more reasonable equity ratio CUB recommends would reduce the rate
hike by another $65 million.
Residential Sales Forecast. ComEd calculated its
rate increase proposal based on a forecast of its usage per
residential customer that is unrealistically low, thereby
overstating ComEd's revenue requirement. The expert witnesses
recommended a reasonable forecast based on the most recent
available ComEd customer data. This change would save ratepayers an
additional $194.7 million.
Other adjustments amounted to about $84.4 million, for a total recommended
reduction of at least $914.5 million. As the case proceeds, CUB
expects the total amount of reductions proposed by consumer
advocates to go beyond $1
billion.
The ICC will rule on the rate-hike request around November,
after an 11-month rate case. The proposed increase would take
effect on Jan. 1, 2024 and impact
delivery rates–what the utility charges to cover the costs of
delivering electricity to customer homes, plus a profit. Those
rates take up about a third to a half of electric bills.
Commonwealth Edison Company
(ComEd) provides service to more than 4 million customers across
northern Illinois, or 70 percent
of the state's population.
Citizens Utility Board (CUB) is Illinois' leading nonprofit utility watchdog
group. Created by the Illinois Legislature, CUB opened its doors in
1984 to represent the interests of residential and small-business
utility customers. Since then, CUB has saved consumers more than
$20 billion by helping to block rate
hikes and secure refunds. For more information, call CUB's Consumer
Hotline at 1-800-669-5556 or visit CUB's award-winning website,
www.CitizensUtilityBoard.org.
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SOURCE Citizens Utility Board