Point of View: More Reasons Why We Need A Rate Freeze

In last week's blog, I called for a freeze of electric rates because competition, necessary for establishing electric rates that are fair to the public, does not seem to exist. The bygone era of monopolistic control and price setting exists once again.

Two Light Bulbs
Electricity Charges Up by 70%-80%


New Information

This past week, I found that things are even worse than I suspected. As I reported in my last blog, I thought that ComEd, our service provider for electrical transmission and distribution, continues to be a regulated utility. But information obtained this week, not widely public, suggests ComEd has acquired significant price setting power, apparently without reasonable review by the Illinois Commerce Commission.

ComEd has unilaterally restructured its rates, increasing rates of customers living in electric-heated multi-family apartments and condominium buildings by up to 80% (62% increase for residences plus an increase of 10-20% in charges for common areas in these same buildings) as compared with other customers who have absorbed a 30% to 40% increase in electric charges since January.

Some 100,000 of the 3.5 million customers, living in electric-heated buildings, are affected by the grossly higher rates. Some might say that these customers deserve to suffer. After all, they have been receiving preferential rates for 25 or more years. But those preferential rates were put in place for a purpose — to induce builders of multi-unit residential buildings during the period from 1960 to 1985 to opt for electric heat rather than gas. The nuclear units, at that time owned by ComEd, were significantly underutilized in the winter months and the extra revenue from the electric-heated buildings, using some 10-20 times more electricity than other customers, was needed to help pay for those units. Those customers are now locked into electricity for heat, a far more expensive energy source than gas. ComEd has taken advantage of the current permissive environment and assessed a huge price increase on their most dependent customers. That's smart monopolistic behavior.

Pile of Cash
Giving Money to the Monopolist

Public Will Not Benefit

To emphasize my main point once again, without competition among the power producers, the public will not benefit from deregulation. Rather, from what we've seen so far, deregulation will only serve to enrich the monopolists and undermine the public's trust in government. ComEd is also acting as a monopolist, taking advantage of government inadequacies and increasing rates to whatever the traffic will bear. A major portion of that traffic was lured in by lower rates, doing its duty to ensure the financial viability of ComEd's nuclear facilities. Now that that is no longer necessary, the nuclear units likely paid for long ago by rate payers in Illinois, ComEd charges whatever it can get.

In the current deregulated environment, wherein rates are established following a flawed theory of deregulation including an auction process that appears suspiciously uncompetitive, rates to every consumer will inevitably rise. Those with the least market power, the locked-in electric-heated buildings, will pay the most, thus breaking the implicit agreement with ComEd.

We need a rate freeze, not only to investigate the deregulation theory as applied to the electric power industry, but also the rationale and the fairness of the excessive rate increases assessed customers in the electric-heated buildings. I haven't taken a poll, but it is my opinion that the people in the electric-heated buildings want nothing to do with deregulation.

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