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Questions and answers about Illinois' electric rate increase
BY RYAN KEITH THE ASSOCIATED PRESS
SPRINGFIELD - Millions of Illinoisans are paying higher electric rates in 2007, thanks to the end of a 10-year price freeze. Lawmakers talked about stopping the increases but haven't agreed on how.
The situation raises some important questions for consumers:
Q:Why did my rates go up Jan. 1?A: A 10-year rate freeze mandated by state lawmakers in 1997 expired. With officials unable to agree on extending the freeze, rates went up at the start of 2007.
Q:How large is the rate increase? A: That depends on what kind of customer you are and where you live. Some commercial users, schools, state and local governments and universities have negotiated deals with alternative providers to reduce the size of the increase. Some residents living in community-operated utility service areas, such as in Springfield, have avoided the big increases, too.
Otherwise, 3.3 million ComEd residential customers are paying an average of 22 percent more for service (about $13 a month), while 1.2 million customers in the three Ameren service territories are paying up to 55 percent more on average (about $30 a month), and in some cases even more.
Q:Why are Ameren rates so much higher?A: Ameren's rates have been locked in for 15 to 25 years, compared to the 10-year freeze for ComEd. The larger increases help make up that difference.
Q:How were the rate increases determined? A: The Illinois Commerce Commission oversaw and approved a so-called "reverse auction" where Ameren and ComEd accepted the lowest bids from companies to supply power. The rate increases resulted from Ameren and ComEd's higher costs to buy power. Those increases were passed on to consumers at what utilities say is no profit for them.
Q:When will I see the increase in my electric bill?A: The increase will begin showing up on bills for the month of January in the coming weeks.
Q:Is assistance available to help me pay my bills?A: Ameren and ComEd have state approval to offer customers the option of paying the higher rates over a longer period, but with a catch: ComEd residents can pay 10 percent more a year for three years, and Ameren customers can pay 14 percent more a year for three years. The remainder of the increase would be due starting in 2010, with 3.25 percent interest tacked on so the companies can defray some of the costs incurred by not getting the whole increase in the first year.
For example, an average Ameren user would pay an extra $110 this year, $120 more next year and $130 more the following year. They would then owe 3.25 percent interest on the $300 rolled over from those years.
Q: Why was there a rate freeze? A: Lawmakers lowered rates and froze them for 10 years in the hope of spurring competition for electricity providers in Illinois, giving consumers more choice and, hopefully, lowering rates.
Q:Did competition develop, and how did it affect consumers? A: Competition developed for the commercial market, as several companies emerged to provide electricity for businesses and industries. But ComEd and Ameren strengthened their grip on the residential market because potential competitors were scared off by the rate freeze, fearing prices were too low to make a profit.
Q: Why didn't the state block the increases?A: State lawmakers and other officials talked a lot about the issue but couldn't agree on what to do. Legislators took no action until after the reverse auction process was complete and since then have floated conflicting measures.
The inaction is due partly to a strong lobbying effort by the utilities, which claimed they would face bankruptcy if forced to provide electricity at a higher cost than they could recoup from customers. So legislators had to choose between letting utility customers pay higher bills now or blocking the increases and potentially seeing service interruptions and other problems later.
Q:Who are the leaders in the debate?A: House Speaker Michael Madigan has pushed to extend the rate freeze another three years. But that measure is stalled in the Senate; President Emil Jones says it interferes with the ICC's job to regulate the industry. Jones and House Republican Leader Tom Cross back a plan to phase in the increases over three years, but that plan is stalled in the House because Madigan claims it would cost consumers more than paying the higher rates now.
Q:Should I expect legislators to help now that the higher rates have kicked in?A: Don't bet on it, at least not right away. Legislators had hoped to pass something in the fall veto session or last week as the old General Assembly wrapped up its work. But with a new Legislature that doesn't begin work in earnest until early February - and no deadlines forcing them to act until summer - it could be several months before the issue is acted on.
Some lawmakers promise they'll continue working to find consensus, hoping public pressure builds as warmer weather increases electricity usage. But others question whether legislators can legally block or adjust increases after they've taken effect and fear such a move could lead to a lengthy and costly court battle.