From Crain’s Chicago Business
Run your dishwasher at the wrong time, watch your electric bill soar?
By Steve Daniels
October 12, 2016
Six South and West Side aldermen, along with Cook County Commissioner Jesus “Chuy” Garcia, are pressing state lawmakers to reject a Commonwealth Edison proposal to radically overhaul how electricity rates are set, saying the changes would hurt low-income residents struggling to pay their bills.
A letter delivered earlier this week to House Speaker Michael Madigan, Senate President John Cullerton and the Republican leaders of both chambers takes aim at ComEd’s push to charge residents not for how much electricity they use in a given month, but for how much they consume at the highest-demand times of day.
Read the letter at the bottom of this story.
ComEd says these “demand charges” will give households a better incentive to use power efficiently. The current system, in place for a century, is designed for a time when the utility wanted customers to consume more, ComEd says.
But the coalition opposing the changes says in its letter that demand charges—Illinois would be the first state to adopt them if ComEd is successful—would confuse customers and lead to higher electricity rates for many who can’t afford it.
“Turning on your dryer, toaster or microwave at the wrong time will significantly increase your bill,” the letter stated. “Demand charges are hard to understand and hard to control. They will make it impossible for consumers to control their electricity bills.”
Among the letter signers: Aldermen Proco Joe Moreno, 1st; Howard Brookins, 21st; Ricardo Munoz, 22nd; Michael Scott Jr., 24th; Jason Ervin, 28th; and Emma Mitts, 37th. Garcia also signed. Nonprofits on the letter include the West Side NAACP, AARP Illinois and the Illinois Public Interest Research Group.
POTENTIAL POLITICAL PROBLEM
Opposition from minority members of the City Council is a potential problem for ComEd, which traditionally relies heavily on Black Caucus support when it asks for help from Springfield—a not-infrequent occurrence.
ComEd and parent Exelon are hoping for passage next month of wide-ranging energy legislation that would include ComEd’s new delivery-rate system, as well as subsidies for two Exelon-owned nuclear plants that it otherwise will close, and a host of environmental provisions.
That measure has been the subject of behind-the-scenes talks between the power industry, consumer groups, environmental groups and renewable-energy developers. A compromise bill hasn’t yet surfaced.
“The burden will be even greater if you live paycheck to paycheck or on a fixed income,” the letter said. “A single hour’s careless electricity use can cause an unexpected bill spike that puts energy or other essential expenditures out of reach.”
In an interview, ComEd Senior Vice President Val Jensen said the utility is negotiating with consumer groups and others on changes that should prevent many consumers from seeing unanticipated monthly spikes in their electric bills. As proposed, the measure would set delivery charges based on a household’s usage during the highest-demand day of the previous month. ComEd has agreed to set rates based on a household’s average usage during the highest-demand hours of business days over the previous month, he said.
The new system should result in lower rates for nearly 80 percent of low-income customers in ComEd’s territory, even if they do nothing at all, Jensen said. That, of course, leaves more than 20 percent who would see higher rates—not a small percentage.
WINNERS AND LOSERS
And therein lies the political problem. Such a dramatic change by definition creates winners and losers, and lawmakers (along with the utility) will be the ones whom the losers blame for their higher bills.
Chicagoans in particular already are experiencing substantially higher property taxes and will see higher water charges due to the need to shore up woefully underfunded government pension plans.
“This is especially coming at a very volatile and sensitive time for consumers,” Garcia said in an interview.
He wondered why ComEd didn’t propose this first to the Illinois Commerce Commission, which regulates utilities. The ICC typically would approve a pilot program before plunging into something so significant. That’s what the agency did when ComEd wanted to install smart meters throughout its service territory. The Legislature eventually endorsed the more audacious plan and the annual rate hikes that made it possible.
“Rolling something like this out . . . is a pretty drastic measure to undertake without first at least piloting the concept,” said Garcia, who’s become a high-profile representative of progressive interests since his unsuccessful but highly competitive run against incumbent Mayor Rahm Emanuel last spring.
ComEd’s Jensen agreed this is a significant change and the present system is working OK for now. “This isn’t an emergency, I will admit,” he said.
But he responded that electricity rate regulation hasn’t changed fundamentally in a century. “Typically, things that are over 100 years old we declare historical landmarks or we decide there’s a better way to do things,” he said.
ComEd won’t make more money from this change, he said. It just will allocate the costs of upgrading and maintaining the local power grid more fairly.
The costs of maintaining the system are mainly due to ensuring ComEd can meet peak demand. So it’s only fair that people pay based on how much they’re taxing the system during those high-demand times.
In addition, under the current structure, consumers who can’t afford or don’t want to install solar panels on their roofs will have to pay higher rates to make up for those who do, as solar power takes greater hold in the area, Jensen said.
HOW CONSUMERS CAN COPE
So how can consumers keep their bills low if their rates aren’t set based on how much juice they consume in a month?
They must take greater care to use fewer appliances and devices that run on electricity when the weather is really hot or really cold during the day, he said. For example, it would be wise not to wash clothes or run dishwashers or leave lights on while air conditioners are running in the middle of the day.
Or “the solution might be, maybe don’t crank the AC quite as high,” Jensen said.
He emphasized that ComEd’s legislation makes $1 billion available for programs that benefit low-income households, including $50 million in direct assistance to consumers struggling to pay their bills.
From ComEd’s perspective, Jensen said, the change will result in cheaper bills for more than half of its residential customers. And the other 40 percent can change their behavior to reduce their costs.
“We need to do a much better job of communicating the message,” he said.
Demand Charge Letter 10.11.16
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