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Exelon Corporation announced plans this morning to separate its regulated utility business from its generation and customer-facing power supply business, creating two publicly traded companies. Commonwealth Edison (ComEd), the electric utility serving northern Illinois, would, along with five other regulated electric and gas utilities, remain a subsidiary of Exelon Utilities.
While Illinois restructured the electricity industry in 1997, endeavoring to break up the vertically integrated utility model, Exelon, through its various subsidiaries, continues to own all of the “upstream” to “downstream” assets from generation to delivery. The end result is as if restructuring had not happened. As Illinois PIRG and others have pointed out, this corporate structure presents numerous potentially harmful conflicts of interest. Illinois PIRG has called for Exelon to divest from ComEd.
Most notably, ComEd’s obligation under law to provide low-cost, efficient utility service conflicts with Exelon’s interest, as the owner of high-cost nuclear power plants, to sell large volumes of power at high prices.
As Illinois PIRG documented in its December 2020 report that examined the 2011 Energy Infrastructure Modernization Act, the first law passed in part through ComEd’s bribery scheme, this conflict of interest may help explain why ComEd has failed to deliver the promised benefits of the smart grid. Many of the potential customer and public benefits of the smart grid stem from reduced power consumption and lower customer bills — outcomes that threaten Exelon’s business interests. Similarly, ComEd has acted to thwart the growth of the renewable energy industry in Illinois, a direct competitor to Exelon Generation.
In response to the announcement, Illinois PIRG Director Abe Scarr made the following statement:
“Exelon’s ownership of ComEd has created long-standing conflicts of interests and Illinois consumers have suffered as a result. Separating Exelon’s generation assets from its regulated utilities is good news for ComEd’s customers and the public. At the same time, Illinois policymakers should recognize that conflicts persist and take action to address them.
Every year, Exelon bills hundreds of millions of dollars of services to ComEd, a subsidiary it controls, a subsidiary which can fully recover those costs from its captured customers. Illinois policy has so far failed to adequately recognize, much less mitigate, the numerous potential conflicts inherent in this relationship.
The Illinois General Assembly has the opportunity this spring to begin undoing the policy harms of the ComEd bribery scandal. That means winning restitution for ComEd customers, restoring effective utility regulation by ending automatic rate hikes through formula rates, and reforming utility political influence by no longer allowing utilities to charge their customers for charitable contributions. Addressing the conflicts of interest that persist beyond an Exelon breakup should remain on the General Assembly’s agenda.”
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