Commonwealth Edison Co. has won permission to give financially troubled Northwestern Steel & Wire Co., its largest customer, cut-rate electrical service immediately.
The Illinois Commerce Commission`s approval came only weeks before Edison is expected to file for ”jobs preservation” electricity rates as an incentive for large industrial companies to expand in northern Illinois. But Sterling-based Northwestern, which has posted losses of $98 million in the last 3 3/4 years, apparently couldn`t wait and sought Edison`s immediate help. ”Edison certainly didn`t want to lose its largest customer,” said Douglas Dougherty, the commission`s economic development director.
”Northwestern made it quite clear it needed help in reducing costs.”
The three-year contract cuts Northwestern`s rates only for electrical usage in excess of the company`s three-year historical average. Thus, Northwestern won`t receive any discounts unless it produces more steel.
Savings will be two-fold. The demand charge–in essence, Edison`s cost of reserving electric capacity for Northwestern–will be halved, while the price of electricity will drop by 1 cent per kilowatt hour. For each kilowatt hour, Northwestern and other large industrial users typically pay 5.5 cents during peak hours and 2.7 cents off-peak.
The commission said Edison priced its electricity above cost but reduced its margin in order to ”to retain Northwestern Steel & Wire as a customer.” Northwestern, a maker of wire and steel products, had no comment on its reasons for seeking the discount electric rates.
Electricity comprises a significant part of Northwestern`s costs. The company, Whiteside County`s largest employer, with 2,200 workers and a $60 million payroll, pays Edison nearly $3 million a month. Its loss would have
”extreme consequences” for Edison, Commissioner Meg Bushnell said.
Northwestern, in technical default on its loans earlier this year, agreed to a $60 million refinancing plan in April. For the first nine months of its fiscal 1985, ended April 30, the company lost $30.4 million.
Last month, Edison disclosed plans to seek permission from the commission for discount rates for large industrial customers.
The Citizens Utility Board, a consumer group, blasted the proposal, citing concern that discounts for large industrial firms would come at the expense of residential and small-business customers.
But Edison contends discounts will be extended only on a company`s added use of electricity, giving industrial users an incentive to expand.
