Testimony begins on utility rates, smart grid

By Julie Wernau
Posted March 8 at 2:55 p.m.

Springfield – Consumer advocates, environmental groups, utilities, government officials and business leaders laid out their wish lists Tuesday for legislation aimed at modernizing the electrical grid, signaling that a version of the bill with added protections for consumers and businesses could have a future in Springfield.

The testimony at a joint hearing of the House Public Utilities and the Senate Energy committees will ultimately be used to hash out the details of Commonwealth Edison-backed legislation that calls for an overhaul of the regulatory process used to set utility rates.

Leaders said they would support legislation that mandates that utilities meet certain energy efficiency goals as a result of smart grid investments, that allows third-party providers to compete on the same playing field as the utilities and that allows the Illinois Commerce Commission to review the books of utilities to determine if rate increases are fair.

“I think smart grid done right is probably the only strategy that will keep rates reasonable going forward,” said David Kolata, executive director of Citizens Utility Board. “But there’s a risk that if you don’t do it right, you have a bill without the benefits.”

The bill (HB14) calls for those rates to be set by formula each year, circumventing the current 11-month review process, and has been criticized by consumer advocates as a “Trojan horse” that will allow utilities to lock in rate hikes and profit for years.

“We believe it gives the utilities a blank check to spend consumers’ money without adequate oversight and allows rates to automatically increase every year. It is an extreme proposal that will effectively leave the Commerce Commission, the attorney general and other consumer advocates on the sidelines as utilities automatically raise their rates year in and year out,” said Paul Gaynor, chief of the Public Interest Division of Illinois Atty. Gen. Lisa Madigan’s office.

For ComEd customers, the legislation would tack an extra $3 a month onto the average bill to support “smart grid” technology that includes self-healing electrical lines, smart meters for customers and other technology aimed at preventing outages and increasing energy efficiency.

In exchange, ComEd would agree to invest $2.6 billion in the next 10 years to modernize the grid, an outlay above the utility’s usual capital costs, and guarantee the creation of 2,000 jobs. The bill also allows other utilities to sign on to the new regulatory process under similar terms.

At Tuesday’s hearing, Ameren testified that it would sign on to the process for its customer base in Illinois — a territory that is roughly the size of Indiana — at an added cost of $5 per year for those customers.

Those additional rate increases come at a time when energy prices are expected to rise because of new Environmental Protection Agency oversight that could lead to the closure of aging coal plants, said Mark Pruitt, director of the Illinois Power Agency, which acts as the broker to purchase electricity for the utilities.

Leaders who testified at the hearing said they were optimistic about the energy savings potential that could come from investing in smart grid technology and would support a bill that legislated energy efficiency mandates. In other words, legislation that rewards utilities for saving consumers money.

“Reliability is money,” said Tim Maisch, vice president of government affairs for the Illinois Chamber of Commerce.

Several groups are backing HB3055 — a bill that’s similar to HB14 but without the same cahnges to the regulatory process and with energy efficiency mandates. Both utilities said customers would get their money back in the form of energy savings and fewer outages from a modern electrical grid. But Anne Pramaggiore, president and chief operating officer of ComEd, said the utility is not willing to make those investments under the current regulatory process because they have no guarantee that they will recoup their costs. In 2007, she said, the company received 76 percent of their requested increase, she said, and in 2005, it was 23 percent.

“This lack of predictability and wild swings in outcomes undercuts our ability to establish multiyear programs to replace equipment,” she said.

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  1. Bob March 8 at 3:22 pm

    If ComEd and the Commerce Commission want “Smart Grid” they should pay for it – not ratepayers that can’t even sign up for the program!

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  3. Chris King March 9 at 11:25 a.m.

    If policymakers want consumers to support the smart grid, they need to explain the benefits. According to a McKinsey analysis, the benefits of smart grids could be as high as $75 per customer per month. This is not just energy efficiency, but includes other elements of smart energy demand – lower annual peak, smart electric vehicle charging, smart appliances and thermostats, energy storage, and making better use of wind, solar, and other renewable resources. There are also benefits in running the power grid better – more accurate voltage, lower energy line losses, and faster restoration of power outages.