Thursday, August 17, 2006

He'll Hear About It?

Have you seen those commercials featuring ComEd CEO Fred Clark telling us how much he and ComEd care about it's customers, as they are about to significantly raise rates? I keep seeing these commercials repeatedly each night. I'd guess I see them 2-3 times a night, and I'm not a heavy TV viewer.


So here's my question: What does an ad campaign with this much air time cost? And, guessing that it's not pocket change, why is the CEO of ComEd spending that kind of money to tell me that he's going to raise my electric rates? Why not just drop the self serving TV media blitz, and save us both some money?


When I see commercials like this, repeatedly like this, I get worried. Where's this rate hike going?

From the Industrial Council of Nearwest Chicago I found this:


Under the new tariff, ComEd will no longer generate or purchase electricity to serve its customers.  They will only move power through their distribution system.  Regulated customers will purchase electricity from suppliers who "win" the ComEd-sponsored "reverse" auctions, which will take place on September 5, 2006.


The same reverse auction processes have recently been held in the states of Pennsylvania, New Jersey and Maryland.  These auctions all yielded price increases of 50% or more from the previous regulated power rates for commercial and industrial customers.  These results do no bode well for business owners using the ComEd system.


Gee whiz, I won a 50% rate increase! Now that's an aution to win! But with rates not hiked in years, ComEd must be hurting. Or not:


Groups opposing the proposed energy purchasing scheme and rate hikes maintain that ComEd and the other energy firms have fared well under the cap. They warn that raising rates by 37 percent or more could open the state up to "market gaming" reminiscent of Enron’s swindling of California. ComEd parent Exelon made $1.9 billion in 2004, and its stock has steadily risen to one-and-a-half times what it was in 2000.


Luckily, that's why we've got the Illinois Commerce Commission:


State utility regulators Wednesday granted Commonwealth Edison Co. a far smaller power-delivery rate increase than the utility requested, prompting ComEd’s president to say the company is reconsidering its proposal to phase in a hike in electricity bills that’s projected to exceed 25% beginning next year.


[...]


A forecasted big increase in power costs, to be set in a state-run auction of power generators in September, is expected to drive up ComEd bills by 25% or more beginning in 2007. Electric rates in Illinois have been frozen under state law for nine years.


And ComEd's reaction from the same article:


But, said ComEd president Barry Mitchell, “we know enough to know it’s a very disappointing result for us. … It just doesn’t reflect the real costs of running the business.”


He said ComEd is almost certain to appeal the commission’s ruling to the Illinois Appellate Court.


In addition, “it certainly means we’re re-evaluating everything we do,” he said. That includes ComEd’s proposal to cap the increase in rates over the next three years at 8% in 2007, 7% in 2008 and 6% in 2009, he said. Under that proposal, which is pending before the commission, the deferred portion of the rate increase would then be collected with interest beginning in 2010.


And just what those costs of doing business be that ComEd is looking to recoup?  Pension obligations and "overhead":


In Wednesday’s action, the commission disallowed two big-ticket costs that ComEd wanted included in the rates it charges. They were an $850 million contribution that ComEd parent Exelon Corp. made recently to shore up ComEd’s pension fund and an increase of over 50% in overhead expenses.


So again, I'll ask. How much does running 30-second spots in regular rotation on network TV during prime time cost? I think that money could be better spent on overhead costs that would save me money come my 2007 electric bill.