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The cost of keeping the lights on in northern Illinois will go up about 22 percent next year, based on the results of the state's first auction of electric power.
The rate increase for ComEd customers will take effect Jan. 2, as a nine-year rate freeze melts away. Electric rates were rolled back 20 percent and frozen as a way to ease the transition for customers to a deregulated electricity market.
The price increase for ComEd's 3.3 million residential and small business customers was on the lower end of what was predicted by consumer advocates, who had warned of increases of up to 40 percent.
Watchdog critical of cap option
ComEd wants to give customers a chance to ease into expected rate hikes by capping increases to 10 percent for the next three years. The cost of any increase over that total of 30 percent would be deferred and paid off by customers, with interest, between 2010 and 2012.
The increase cap would be optional for customers and must be approved by the Illinois Commerce Commission. The Citizens Utility Board, a consumer watchdog group, has criticized the program as a high-cost loan, which won't help consumers.
Mary Wisniewski
ComEd has said it could go bankrupt if it's not allowed to recover its costs for buying power. Anne Pramaggiore, ComEd's vice president of regulatory and strategic services, said the auction held earlier this month will result in rates 3 percent lower than what customers paid in 1995 before the rate freeze.
Not so fast, watchdogs say
"The auction resulted in the lowest available price, and a much lower increase than critics predicted," Pramaggiore said.
But the Citizens Utility Board still believes ComEd could have done better, and will ask lawmakers for a three-year extension of the freeze.
"We're looking at a massive increase at a time when Exelon, ComEd's parent company, has record earnings, record profits and a record share price, and is cutting rates in Pennsylvania," said CUB Executive Director David Kolata.
Utilities such as ComEd sold off their power generation as part of state restructuring. ComEd is now responsible only for distribution, and must buy power from suppliers such as Exelon.
The 16 suppliers who successfully bid in the auction held Sept. 5-8 included financial groups such as Morgan Stanley Capital Group and energy companies such as Wisconsin-based WPS Energy Services Inc., a unit of the company looking to buy Peoples Energy.
The Illinois Commerce Commission chose a "reverse auction" process for utilities to buy power. The bids start high, and then descend until the price bid matches with the amount of power required.
The ICC approved the auction process over the objections of CUB and government officials, including Gov. Rod Blagojevich, who said that residential customers weren't ready for a deregulated market because there was no real competition. The prices set by the auction will remain in effect until June 2008.
Attorney General suing
The auction price is better than analysts thought they'd see six months ago, according to Omar Zoheri of Sieben Energy Associates in Chicago. But energy prices have dropped in the past couple of weeks, so it could have been even better if held in the past few days, Zoheri said.
"It's good, but the market has come off a lot in the last two weeks," said Zoheri.
ComEd says its rates in the Chicago area will be 14 percent lower than the average rate for the 10 largest metropolitan areas. But the Illinois Attorney General's office, which is suing to reverse the auction, said Illinois' rates for 2007 are now 25 percent higher than other states in the region.
"If this had been a truly competitive auction, the prices would have been much lower," said senior assistant attorney general Susan Hedman.
The rate increase for ComEd customers will take effect Jan. 2, as a nine-year rate freeze melts away. Electric rates were rolled back 20 percent and frozen as a way to ease the transition for customers to a deregulated electricity market.
The price increase for ComEd's 3.3 million residential and small business customers was on the lower end of what was predicted by consumer advocates, who had warned of increases of up to 40 percent.
Watchdog critical of cap option
ComEd wants to give customers a chance to ease into expected rate hikes by capping increases to 10 percent for the next three years. The cost of any increase over that total of 30 percent would be deferred and paid off by customers, with interest, between 2010 and 2012.
The increase cap would be optional for customers and must be approved by the Illinois Commerce Commission. The Citizens Utility Board, a consumer watchdog group, has criticized the program as a high-cost loan, which won't help consumers.
Mary Wisniewski
ComEd has said it could go bankrupt if it's not allowed to recover its costs for buying power. Anne Pramaggiore, ComEd's vice president of regulatory and strategic services, said the auction held earlier this month will result in rates 3 percent lower than what customers paid in 1995 before the rate freeze.
Not so fast, watchdogs say
"The auction resulted in the lowest available price, and a much lower increase than critics predicted," Pramaggiore said.
But the Citizens Utility Board still believes ComEd could have done better, and will ask lawmakers for a three-year extension of the freeze.
"We're looking at a massive increase at a time when Exelon, ComEd's parent company, has record earnings, record profits and a record share price, and is cutting rates in Pennsylvania," said CUB Executive Director David Kolata.
Utilities such as ComEd sold off their power generation as part of state restructuring. ComEd is now responsible only for distribution, and must buy power from suppliers such as Exelon.
The 16 suppliers who successfully bid in the auction held Sept. 5-8 included financial groups such as Morgan Stanley Capital Group and energy companies such as Wisconsin-based WPS Energy Services Inc., a unit of the company looking to buy Peoples Energy.
The Illinois Commerce Commission chose a "reverse auction" process for utilities to buy power. The bids start high, and then descend until the price bid matches with the amount of power required.
The ICC approved the auction process over the objections of CUB and government officials, including Gov. Rod Blagojevich, who said that residential customers weren't ready for a deregulated market because there was no real competition. The prices set by the auction will remain in effect until June 2008.
Attorney General suing
The auction price is better than analysts thought they'd see six months ago, according to Omar Zoheri of Sieben Energy Associates in Chicago. But energy prices have dropped in the past couple of weeks, so it could have been even better if held in the past few days, Zoheri said.
"It's good, but the market has come off a lot in the last two weeks," said Zoheri.
ComEd says its rates in the Chicago area will be 14 percent lower than the average rate for the 10 largest metropolitan areas. But the Illinois Attorney General's office, which is suing to reverse the auction, said Illinois' rates for 2007 are now 25 percent higher than other states in the region.
"If this had been a truly competitive auction, the prices would have been much lower," said senior assistant attorney general Susan Hedman.