Good morning. My name is Abe Scarr and I am the director of Illinois PIRG. Thank you for the opportunity to provide public comment today.
I also want to thank the Chairman and the Committee for supporting the Chairman's resolution calling for state action to address the Peoples Gas pipe replacement program in March. While different in many ways, there are similarities between the bill rider Peoples Gas enjoys for its pipe replacement work and the formula rates ComEd enjoys for all ratemaking.
We’re here today because of the recent revelations of ComEd’s corrupt and illegal schemes, but this corruption is not news. It has been plain to see to anyone willing to look. ComEd and Exelon have used political power to corrupt utility regulation in Illinois.
The state constructed a system to regulate utilities to ensure a public good by creating an opportunity for private profit. ComEd flipped this on its head: guaranteeing private profit while leaving regulators without the tools to hold it accountable to the public.
The Energy Infrastructure Modernization Act, or EIMA, was crafted such that ComEd could quickly and automatically convert massive spending into profits. It has succeeded in building ComEd’s rate base by 86% and profits by 47% between 2011 and 2019. ComEd has made more than $3 billion in profits since the 2013 EMIA trailer bill, according to SEC filings.
EIMA has severely limited Commission authority, while shouldering it with an overwhelming number of proceedings and not enough time, or the proper tools, to analyze utility filings.
If ComEd’s presentation before the committee today is similar to the one it gave to the Illinois Commerce Commission yesterday, prepare for an attempt to draw a sharp distinction between the illegal misconduct that led to its legislative victories and the legislation’s impacts on customers. It will tout improvements in reliability and customer satisfaction, and cite numbers about customer bill levels. But these are distractions and window dressing. We don’t know if any of these benefits are worth $3 billion in profits. We do know that the company’s arguments regarding bill levels take advantage of decreases in power prices (that ComEd simply passes on) to obscure increases in delivery rates (that translate to ComEd profits). In other words, ComEd ate up our savings.
Ask yourself this: if ComEd’s legislation was in the public interest and not heavily tilted towards ComEd and Exelon’s interests, why did it engage in an illegal bribery scheme to pass it? Put another way, if you were a ComEd executive placing yourself and your company at grave risk through unethical and illegal activity, would you do so for legislation that did not promise significant company gains? Of course not.
Customers and the public have certainly seen some benefits from these laws, notably improved reliability and a nascent solar market, but, without proper examination, we have no way of knowing if customers are getting real value from the 40% increase in delivery rates they have paid since 2011, or if alternative investments would have brought significantly more value at lower cost.
Recall that ComEd suffered chronic reliability problems in the decades preceding EIMA. They similarly spent heavily to improve reliability around the turn of the millenium without special cost increases. Do investments in improvements necessary to meet fundamental service obligations deserve the radical, lopsided incentives ComEd received through EIMA? No.
Many “customer application” benefits that ComEd promised when championing EIMA have not arrived. These “customer applications” are tools enabled by smart meters that customers can use to get more and better information, have more control, use new technology, use less energy and save money.
One example is time of use rates, which provide customers who opt in to them with the opportunity to save money by shifting energy consumption from the times of day that power prices are higher to the times of day that power prices are lower. This allows the individual customers shifting usage to save money, while also lowering overall system costs, benefitting all customers. Some consider time of use the premier customer application benefit of smart meters. However, despite numerous attempts to force ComEd to introduce time of use rates since EIMA passed, the company just began a pilot program in 2020. That ComEd customers won’t broadly be able to opt in to time of use rates until 2024 or 2025 is a failure.
Many more of the uses of smart meters are not currently available to ComEd customers, or are embarrassingly under-utilized.
One potential reason for this failure to deliver customer application benefits is that they lead to lower energy consumption, which harms Exelon’s business interests. Exelon CEO Chris Crane stated that smart meters represent "value destruction to the generation company,” during a regulatory proceeding in Maryland.
Many of the needed reforms will take place in the Illinois General Assembly, or before the Illinois Commerce Commission. The City of Chicago’s jurisdiction on these matters is limited. We have called on the Illinois General Assembly to repeal formula rates, to enact reforms that place appropriate limits on ComEd’s ability to amass political power through political contributions, an army of lobbyists, and charitable contributions paid for by ratepayers rather than shareholders, and to take action to address the harms presented by the conflicts of interest inherent in Exelon’s ownership of ComEd. Yesterday, we called on the Illinois Commerce Commission to conduct a full audit of ComEd - with a focus on the cost of the grid, demand higher quality data, and re-examine the relationship between ComEd and Exelon.
Here are recommendations for City action:
First, join our call for meaningful reform at the General Assembly and Illinois Commerce Commission, and continue to use this committee as a forum for meaningful discussion.
Second, increase transparency: demand high quality and detailed data and reporting from ComEd as a condition of its franchise agreement. The agreement traditionally includes reporting on reliability performance, but there is much more reporting the City could demand from Comed, for example:
- Are Chicago ComEd customers benefiting from “customer applications” made possible by smart meters? How many and in which neighborhoods? What is ComEd doing to maximize these benefits for all Chicago residents?
- Where is ComEd investing its energy efficiency dollars, again by neighborhood? What is ComEd doing to help all customers save money by saving energy? What is it doing to address hurdles to unlocking efficiencies in older, more challenging building stock?
- What is ComEd doing to ease interconnection barriers for solar developers, both for rooftop and community solar projects? At a granular level, what is the grid’s hosting capacity - how much solar can be easily integrated and where might grid upgrades be necessary to bring solar to all communities?
- What is the average energy burden of the company’s customers by census tract? And what is the utility doing about it?
The City can, and should play an active role in ensuring ComEd customers are made whole and gain the benefits and services they deserve from their utility.
Thank you again for the opportunity to provide comment today.