Commonwealth Edison - The 2007 Rate Case

The 2007 Rate Case

In 2006, as the end of the rate freeze drew near, Commonwealth Edison had to accommodate both a fully competitive market and the end of its own price agreements with the purchasers of its former generating stations. The most visible effect of the proposed rates was to increase residential electric rates sharply. This set the stage for a contentious and vigorous public debate about the rationale for electric deregulation.

ComEd's proposal had two parts. First, delivery rates, which cover the cost of transporting electricity from the generators to the customer, would rise by 22% on the average. Second, the price of the electricity itself would be determined from a reverse auction, with the winning suppliers bound to supply energy to ComEd's customers at some fixed price for a fixed period of time. The net effect was an increase of around 33% in the typical residential electric bill.

The prospect of seeing electric bills rise so dramatically drew much public outcry. It was widely claimed, at the time, that such a dramatic rise in rates was proof that the deregulated environment did nothing to help the consumer and was a sham. The Illinois General Assembly proposed extending the existing rate freeze for several more years in order to give time to develop a better plan. ComEd responded that extending the rate freeze would bankrupt it and that it did not have the ability to obtain electricity at a cost that would support the frozen rates.

In January 2007, the Chicago Tribune reported that Commonwealth Edison was behind Consumers Organized for Reliable Electricity (CORE), an organization that had been arguing against a proposed statewide freeze in electricity rates. The campaign uses a commonly used corporate tactic referred to as astroturfing, in which corporations fund organizations that appears to be grassroots or consumer rights focused to lobby on the corporation's behalf with politicians and the public. Illinois then Lieutenant Governor Pat Quinn attempted to force CORE to put ComEd's name on the ads in a petition filed with the Illinois Commerce Commission. The Commission ultimately dismissed the petition, but not before CORE agreed to disclose ComEd's support of it more clearly.

Ultimately, the General Assembly did not freeze rates, and ComEd's new rate plan went into effect on January 2, 2007. However, subsequent concerns about the impartiality of the reverse auction process have resulted in the establishment of the Illinois Power Authority, which will ultimately be responsible for producing and purchasing the energy for Illinois utilities.

As part of the compromise plan to avoid a rate freeze, ComEd devised a means by which a customer might defer payment of the 22% increase, subject to interest of over 3% on the unpaid portion of the increase.