Take a look at the electric rates on your Commonwealth Edison Co. bill. Would you like to see them reduced by 15 percent? How about a 15 percent reduction plus another 9 percent cut in the years to come? Or do you want to buy your electricity from somebody else who might sell it to you even cheaper and just as reliably?
It almost happened. Lower rates and the option to shop around for cheaper power were just two of the benefits of legislation supported by the Citizens Utility Board during the spring Illinois legislative session. The House passed the measure by vote of 85-12, but it died when the Senate failed to bring it to a vote.
Fortunately, the General Assembly will have one more opportunity to pass electric-industry reform when it reconvenes in the fall. If it does, here’s what will happen.
1. Residential electric rates will be reduced by 15 percent, the largest decrease ever seen in Illinois–10 percent next year and 5 percent in 2000. That adds up to an annual savings of more than $150 for the typical ComEd household. Over the next three years, the rate cuts could put more than $1.6 billion in consumers’ pockets instead of the utilities’.
2. Competition for residential customers will be phased in beginning in 2000. By 2002 all customers will be able to shop for electricity. ComEd will be required to maintain the reliability of its transmission and distribution system and to allow other suppliers to deliver electricity over their wires.
3. Utilities will retain “the obligation to serve,” ensuring that no customer will ever be left without an electricity provider. After 2003, utilities like ComEd will be required to offer electricity at market-based prices to all customers. That means even consumers who choose not to shop around for power will get the benefit of competitive prices. After nine years, savings for the average consumer (compared to today’s rates) will approach 24 percent. For some, the savings could be even greater.
4. Low-income customers, who pay a disproportionate share of their income toward utility bills, will benefit in two ways. They will get long overdue rate relief and a new $76 million program to reduce the number of households faced with the choice of “heat or eat.”
5. The confusion, the hassles, the “slamming” and the scams in the long-distance telephone market, which have made many consumers long for the good old days of the Ma Bell monopoly, will not be allowed in the Illinois electricity market. The legislation contains real consumer protections–the strongest in the country. It will prohibit abusive marketing, prevent discrimination based on neighborhood or income, and require utilities to provide full disclosure of prices and terms of service. To give consumers the tools they need to become smart shoppers, a consumer education program will be mandated by the new law.
6. Customers will no longer have to pay for all of ComEd’s bad investments in uneconomic nuclear plants. Currently, consumers pay 100 percent of these so-called “stranded costs,” which are folded into in today’s electric rates. The proposed legislation requires residential customers to pay only about 50 percent of these costs over the next decade. ComEd will be forced to make up the difference by becoming more efficient and cuttings expenses.
So, if this legislation is such a good deal for consumers, why does ComEd support it? Why would a utility company voluntarily give up the highest rates in the Midwest and lose billions of dollars in revenue? Because ComEd’s future is in jeopardy. Uncertainty has dissipated investor confidence and sunk the company’s stock price to a 15-year low. Almost any deal that allows ComEd, the nation’s most nuclear-intensive utility, an opportunity to recover from its mistakes and ready itself to face inevitable competition, will be viewed positively on Wall Street.
Critics of the bill have charged that it doesn’t get us to a competitive market fast enough–that if we just open up the market immediately we don’t need guaranteed rate reductions or consumer protections. This view is driven by ideology, not reality, and ignores what has happened to consumers in other recently deregulated markets, such as natural gas, air travel and telecommunications. In each case, the promised benefits have fallen far short of projections.
Will a competitive market in electricity result in lower rates, better service and innovative new technologies? For most consumers, the answer is probably yes. But it would be irresponsible to leave access to affordable electricity–a prerequisite for every facet of modern life–dependent on an uncertain market that exists today only in the theories of economists.
That’s why, in ending almost a century of monopoly electric service, the legislature must strike the right balance between opening the market and protecting the public. And that’s what the pending bill does. It gives Illinois consumers a very big bird in the hand, while still allowing pursuit of the flock that may be in the bush.
