Commonwealth Edison Co. filed Thursday for a $460.3 million rate increase that would take effect in 1995 and raise average utility bills 8 percent, with a greater increase-9.5 percent-for residential customers.
Come November, consumers already will face a considerable increase in electric rates when a rebate ends. That refund has reduced bills approximately 25 percent.
In announcing the much-expected request, Edison executives said they had to raise rates to remain “economically viable.” They said the hike is needed to help the financially troubled company recover what it spends to produce electricity and to reduce debt so burdensome that it contributed to a downgrading of Edison’s bonds.
That may not matter much to Edison customers, but it affects how much the company must pay for borrowed money and thus its economic health.
The increase, if approved by the Illinois Commerce Commission, is not expected to take effect until January.
The proposal assumes that Edison’s three controversial nuclear plants-one at Byron and two at Braidwood-will be accepted by regulators and the courts as 100 percent justifiable facilities. Disputes over how much of those plants were “used and useful,” in the terminology of regulators, has cost Edison numerous rate hike proposals in the past.
The recent cold spell has revealed how useful Edison’s huge electrical generating base can be, contends Frank Clark, manager of governmental and regulatory affairs for the utility.
While East Coast utilities forced brownouts on customers during peak cold spells, Edison had no shortage of electricity despite setting several winter-use records in January, Clark said.
“Others had capacity problems; we didn’t,” he said.
A new rate proposal had been expected since last September, when Edison agreed in a sweeping settlement to put past rate and fuel contract squabbles behind it and pay a $1.34 billion refund to customers. That has resulted in cuts in Edison bills of approximately 25 percent since November. Those refunds will end this November.
Pamela B. Strobel, Edison’s general counsel, said the refund should give Edison a “clean start” in matching revenues to rates.
“It should no longer be an issue whether these three nuclear plants are used and useful,” Strobel said.
Nonetheless, consumer groups that negotiated with Edison over that refund immediately opposed the new proposal.
“This company does not deserve a rate increase at all, much less one of this magnitude,” said Martin Cohen of the Citizens Utility Board, a group that advocates lower utility rates.
“Nothing has changed recently to justify charging ratepayers 100 percent of the cost of the last nuclear plant, the Braidwood plant. Nothing has changed to justify making ratepayers pay for unneeded portions of (Edison’s) fleet of power plants,” Cohen said.
“The company has to show that operating expenses have gone up and that revenues haven’t kept pace. Some operating expenses have dropped significantly. The drop in interest rates has saved the company hundreds of millions of dollars.”
Howard A. Learner, executive director of the Environmental Law and Policy Center of the Midwest, said it appeared to be “business as usual” for the utility.
“It’s unfortunate that after appearing to turn the corner with a settlement process last year, Edison seems to have reverted to the old business as usual by seeking a massive rate increase.”
Edison executives said that their operating costs have gone up by hundreds of millions of dollars in recent years while overall debt service has not dropped.
The company has borrowed several additional billions of dollars in the 1990s, pushing its total borrowing to just under $8 billion. As a result, though interest rates have gone down, Edison’s overall interest payments have remained “fairly stable” and have not dropped, said John C. Bukovski, chief financial officer.
Bukovski said Edison has spent $350 million more in operating expenses since 1990. That figure includes a savings of about $130 million as a result of 1,500 layoffs and other cost-saving steps carried out in the last year.
Employee health-care costs have risen $100 million in that time, Bukovski said, and federal safety requirements and other measures have added $100 million to the cost of running nuclear plants.
In addition, it was recently discovered the company must set aside an additional $43 million to deal with the problems of closing its nuclear plants when their useful life is over.
Improving customer relations, including an 800 number for reports of outages and other complaints, has cost $50 million, Bukovski said.
Bukovski said the increase also is necessary to fund an ambitious capital-improvement program.
“In the next three years, we plan to spend $2.4 billion on construction, maintenance and upgrading our system,” he said. “Without this rate increase, we won’t be able to raise the capital to do that.”
The higher percentage increase for residential customers than for industrial and commercial users-9.5 percent compared with 5.9 percent-is necessary to keep Edison competitive as big users seek energy alternatives, Edison executives said.
In addition, industrial customers in the past have subsidized residential rates, they said.
Edison last won a rate hike that wasn’t overturned by the courts in 1991, a 2.7 percent increase. The last permanent hike was in 1985 and took effect over two years.
Edison cut its dividend 50 percent to $1.60 in 1992, and subsequently saw its bond rating fall to triple B, barely investment grade. Rating companies have said Edison needs further cost savings as well as a new rate hike to prevent it from a further downgrade to below-investment, or “junk bond,” levels.
The additional cost for a typical single-family residence would be $6.62, and for an apartment $2.53. That is based on the average cost next year, after the current refund has expired.
