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The public advocacy group Illinois PIRG says ComEd has dragged its feet on offering tools or programs to help customers unlock savings from smart meters.
ComEd customers have paid higher bills for energy delivery and seen few benefits from multibillion-dollar smart grid investments because of laws the utility pushed through the Illinois Legislature that gutted regulatory protections and guaranteed profits, a new report by a public advocacy group alleges.
The report from Illinois PIRG says ComEd and its parent company Exelon saw profits skyrocket thanks to 2011 state legislation authorizing $2.6 billion in smart grid-related investments and changing how ComEd rates are set.
ComEd declined an interview request but in a statement disputed the claim that customers have not benefited from its smart meters, which it says have improved reliability and reduced response times for outages, among other benefits.
The law, passed despite then-Gov. Pat Quinn’s veto, is at the heart of a recent settlement with the federal government and wide-ranging allegations of bribery and misconduct involving the utility, lobbyists and elected officials.
The settlement agreement states, and ComEd officials have argued, that customers were not harmed by the alleged misconduct. But Illinois PIRG’s 111-page report released Dec. 1 argues otherwise.
It says customers were charged unnecessary amounts — that yielded massive profits for the companies — while ComEd and Exelon have done little to help customers access the savings and other benefits promised from the smart grid and smart meters, and have stalled on even allowing third parties to help customers benefit from smart meters.
ComEd did so, Illinois PIRG argues, because the customer benefits of smart meters and smart grid improvements — lower energy use and lower bills — would hurt the bottom line of Exelon, which owns the state’s six nuclear plants. This represents a conflict of interest that has persisted despite deregulation in the late 1990s meant to sever generation from distribution, Illinois PIRG argues.
In 2011, ComEd convinced the state legislature to pass the Energy Infrastructure Modernization Act to fund the overhaul of the utility’s grid, increasing reliability and instituting an interactive smart grid able to distribute energy more efficiently through two-way communication, “self-healing” and other attributes. The smart grid is also supposed to be more conducive to rooftop solar and other distributed generation.
ComEd’s modernization program also involved the installation of 4.2 million advanced smart meters, theoretically allowing customers to reduce their energy use and bills, since granular data on energy use could allow them to access innovative pricing plans and change their behavior.
The Energy Infrastructure Modernization Act fundamentally changed how ComEd recoups its costs and makes profits from ratepayers: from the typical model where all investments must be justified and funds are not recouped until after the benefits have accrued to customers, to a “formula rate” model where ComEd is essentially guaranteed profits based on their predicted investments.
The Illinois PIRG report explains that the change shifted the burden of proof from ComEd having to prove the necessity and prudence of its planned investments to the Illinois Commerce Commission, to the commission and stakeholders having to prove after the fact that any investments were unjustified or imprudent. This essentially gutted the commission’s power and turned it into a “rubber stamp” for the utility, Illinois PIRG says.
ComEd had argued it needed the change to provide financial stability and predictability necessary for massive investments in the smart grid and smart meters. But the report argues that ComEd continues reaping profits long after smart meters are installed and smart grid investments are made, with the regulatory changes meaning that customers don’t even see the financial benefits from the increased efficiency of the grid.
The change to formula rates under the law “built ComEd and Exelon a profit machine entirely out of proportion to the law’s specified investments,” the report says, garnering $4.7 billion more for ComEd between 2013 and 2019 than they would have earned under the previous rate structure.
Ratepayers meanwhile paid $1.6 billion more in delivery charges during those years than they would have under the previous system, Illinois PIRG found.
ComEd has pointed out that customer bills overall have remained stable or dropped in that time. Illinois PIRG counters that this is because power prices as a whole have dropped; customers would have seen much greater savings without the formula rate change and “inefficient or unnecessary spending” by the utility.
The report says that ComEd “promised customers a fundamental shift in how they interact with their utility: robust data at their fingertips and a market full of innovative smart meter-enabled products and services to choose from.”
But ComEd made sure the legislation committed it only to “enabling” those products and services, not ensuring their delivery, the report points out. The legislation largely left it to third-party providers to help customers access savings, and yet ComEd has stalled on making the data from its smart meters available to facilitate such arrangements. The company has invoked privacy concerns and the need to develop protocols as justification for years-long delay in the ability to implement programs using the smart meters, the report alleges.
Meanwhile ComEd has stalled on offering its own pricing programs taking advantage of the smart meters. Time-of-use pricing, a relatively common and straightforward arrangement that charges customers less for using energy at times of low demand, won’t be available until at least 2024, with a small pilot currently underway.
The 2011 law called for ComEd to fund outreach and education efforts to help people take advantage of smart meters, and established the utility-funded Illinois Science and Energy Innovation Foundation to work with community groups and other stakeholders. (The foundation has awarded grants to the Energy News Network for smart grid coverage). Nonetheless, most Chicagoans seem unaware of how to utilize the smart meters’ data.
Illinois PIRG alleges that after withholding programs and benefits promised in the 2011 law, ComEd and Exelon exerted continuing political leverage by offering to implement such programs in the future. This strategy, as Illinois PIRG and others see it, helped secure $2.35 billion worth of supports for two of Exelon’s nuclear plants in the 2016 Future Energy Jobs Act.
The Energy Infrastructure Modernization Act “was carefully drafted so that ComEd could easily avoid delivering on all of its promises, and has notably failed to deliver the promised customer benefits most threatening to Exelon. Instead, ComEd withheld these promised benefits, providing leverage to win even further windfalls for itself and Exelon,” the report says.
The fact that ComEd installed smart meters territory-wide in six rather than the promised 10 years shows it didn’t need the regulatory reforms to proceed, the report argues. It says ComEd spent more than necessary on the smart meters and other infrastructure, allowing it to inflate its rate base — the amount it recoups from customers, plus a designated profit — in order to “make money by spending money.”
Even after the smart grid upgrades have been made and the smart meters installed, ComEd has continued to increase its spending on the grid, and hence its profits, offering only vague explanations and justifications, the Illinois PIRG report says.
Meanwhile even as smart grids are meant to facilitate the deployment of rooftop solar and other distributed generation, ComEd has pushed for policies — like an end to net metering — that make it harder for customers to install solar, the report notes.
Examining ComEd and Exelon’s influence and broken promises in the past are especially important as Illinois debates another major energy bill, said Illinois PIRG director Abe Scarr, who authored the report along with Jeff Orcutt of Chapman Energy Strategies.
“There was this promise with the formula rate bill, all this happy talk of a new greener future, but that didn’t really arrive through the formula rate law,” Scarr said. “It’s only through FEJA [the Future Energy Jobs Act] that some of those advances came, but they were able to use that promise again to extract further concessions — the nuke bailout. And already four years later, we’re facing another funding crisis that will require further legislative intervention” — since funding for renewable supports created by FEJA is already nearly depleted.
ComEd and Exelon declined to answer questions or respond to points from the report, and provided a statement:
“The bipartisan legislation that was passed – EIMA and FEJA – resulted in substantial benefits for ComEd’s customers, including reliability that has improved more than 70% since 2012 to record levels. ComEd’s energy efficiency programs, which grew significantly under the legislation, have enabled customers to save more than $5 billion on their bills since 2008.”
The statement goes on to say the 4.2 million smart meters installed by ComEd give customers more control over their energy use, enable quicker response times during outages, and provide access to money-saving programs. The average residential bill is lower than it was nearly a decade ago, the company said, and it has requested delivery rate decreases in five of the last 10 years.
While indictments and subpoenas have been issued regarding alleged criminal bribery and corruption around ComEd, the Illinois PIRG report argues that “corruption” is more deeply seated in structures that are legal but harm customers and delay a shift to cleaner energy, in order to benefit Exelon and ComEd. (The Energy Infrastructure Modernization Act also applies to downstate utility Ameren, but is considered driven by and primarily benefiting ComEd).
Illinois PIRG makes recommendations it says will restore protections for customers, oversight power for the Illinois Commerce Commission and accountability for companies.
It argues that the Illinois state legislature should ban political contributions by investor-owned utilities and prohibit utilities from using ratepayer money to make charitable contributions, which can often be used for influence. (Shareholder money could still be used for such contributions; Exelon holds almost all of ComEd’s shares).
“We need to be ending the practice, which is pretty unique to Illinois, where utilities get to use customers’ money to make charitable contributions — getting all the credit and public goodwill that generates,” Scarr said. “It’s not actually charitable — they’re not giving away their money, they’re giving away our money.”
Illinois PIRG recommends beefed-up transparency and accountability, including “making ethics rules in the deferred prosecution agreement permanent and applicable to all Illinois investor-owned utilities.” It calls for a return to traditional rate-making, rather than the formula rates.
“We shouldn’t leave it to federal prosecutors — the Illinois General Assembly needs to take action in restoring basic oversight of utilities that we had for decades but was undone by the formula rate law,” Scarr said. “We need to be taking a look under the hood at how ComEd has spent its money over the last decade, and make sure we are not overpaying in the future and getting some money back now.”
And it says Exelon should be forced to divest from ComEd and/or from its generation subsidiary, Exelon Generation.
Illinois PIRG demands a comprehensive audit of ComEd’s grid investments and an Integrated Grid Planning process going forward that involves the commission and stakeholders, “maximizing the use of distributed energy resources [like residential rooftop solar and energy storage] to offset expensive grid investments.”
To ensure customers and the environment can actually benefit from smart grid investments, it says time-of-use rates should be immediately instituted, and the government should investigate and facilitate the ability of third-party providers to offer energy conservation programs like Green Button Connect using smart meter data.
“We’ve accepted ComEd and Exelon’s power as ‘just the way things are,’” the Illinois PIRG report says. “We’ve accepted Exelon’s complete control of ComEd and its obvious conflicts with ComEd’s service obligations. ComEd’s admission to a long-running criminal scheme to unduly control Illinois energy policy should create opportunities for meaningful reform unimaginable months ago. These reforms are possible, but in no way inevitable. ComEd amassed its power and influence over many years, mostly through legal means. While current problems diminish its power, that power remains formidable.”