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Enron Mail |
-----Original Message----- From: "Fein, David I. - CHI" <david.fein@piperrudnick.com<@ENRON Sent: Saturday, October 13, 2001 3:09 PM To: Migden, Janine; 'mulrich@enron.com'; 'rboston@enron.com'; Kingerski, Harry; 'gsharfma@enron.com'; 'phil.o'connor@aesmail.com'; 'julie.hextell@aesmail.com'; 'richard.spilky@aesmail.com'; 'Dfabrizius@kaztex.com'; 'gregory.lizak@IMServ.invensys.com' Cc: Landwehr, Susan M.; Hueter, Barbara A.; Townsend, Christopher J. - CHI Subject: Crain's Article -- October 15, 2001 ComEd seeks rate hike for biz Second proposal spurs opposition among regulators Crain's -- October 15, 2001 By Steve Daniels <mailto:sdaniels@crain.com< Commonwealth Edison Co. is pressing for another big hike in its charges for delivering electricity to customers of rival power suppliers. The Chicago utility's Aug. 31 filing with federal regulators to nearly double transmission rates - for carrying electricity over its long-haul, high-voltage lines for these customers - has triggered opposition from state regulators. That request followed a June proposal for a 37% increase in distribution charges, for moving power through the utility's more local, lower-voltage wires (Crain's, June 11). That bid is subject to approval by the Illinois Commerce Commission (ICC). If approved, the two rate hikes together will increase transmission and distribution costs by about 50% for business customers that leave the utility for competing power suppliers. Perhaps more important, the new rates would clear the way for delivery charge increases of the same magnitude on all Chicago-area power users in three years, when a freeze on ComEd's rates expires. Transmission and distribution rates account for 20% to 25% of a typical business customer's total power bill - so, a typical bill could rise as much as 10% with these increases. Apart from the bottom-line hit to businesses, ComEd competitors and local government officials also warn that the hikes could stymie the nascent competitive market because they could prevent alternative suppliers from offering savings from the utility's bundled rate. AES NewEnergy Inc., the largest alternative supplier in Illinois with more than 800 customers, says 86% of its customers will see their bills increase if both proposals are approved. "What this means is that large numbers of customers would be down to the point where bundled (utility) service is cheaper, or it's so close that they wouldn't bother choosing an (alternative) provider," says Philip O'Connor, president of AES NewEnergy's Chicago office. "You cannot have competition being viable when your base of potential customers is so small." Arlene Juracek, ComEd vice-president of regulatory and strategic services, counters that few businesses actually will pay higher rates in the short term because the rise in delivery charges will be offset in many cases by a corresponding decrease in "transition" fees paid to the utility when customers use another supplier. The Aug. 31 transmission rate proposal, filed with the Federal Energy Regulatory Commission (FERC), surprised the Illinois Commerce Commission, which asked FERC two weeks ago to block the rate hike. The latest rate hike proposal incorporates a proposed change in ComEd's account methodology, in which the utility would wipe off its books more than $660 million of accumulated depreciation of transmission assets and ask ratepayers to shoulder that investment again. 'Unjust and unreasonable' In its filing with FERC, the ICC said the proposed change "would result in artificially high transmission rates, and an unjust and unreasonable windfall to ComEd at the expense of transmission ratepayers." "They're essentially changing the rules of the game halfway through the game," says ICC Commissioner Terry Harvill. ComEd responds that FERC itself - in an order last year pushing utilities to combine their transmission assets into large, regional networks - said utilities could consider changing the accounting method. "ComEd believes we have an obligation to the shareholders of (parent company) Exelon Corp. to receive compensation in accordance with what is permissible by law," says Steven T. Naumann, ComEd vice-president in charge of transmission services. "The commission will determine if this is what they meant (in their order) or if it is not what they meant." Meanwhile, the city of Chicago, frustrated by ComEd's resistance to sharing detailed financial data, is poised to ask the ICC formally to order an outside audit of ComEd's books for 2000. The state attorney general's office and the Cook County state's attorney's office are joining the city in the petition, which could be filed as early as Monday, sources say. The audit, which ComEd opposes, would be aimed at separating ordinary maintenance and improvement costs from the extraordinary measures ComEd took in 1999 and 2000 to beef up its distribution system, after acknowledging it had neglected that infrastructure during the previous two decades. The behind-the-scenes skirmishing spotlights how seriously local government officials are taking the regulatory proceedings. While the new rates affect only those customers in the competitive market, they'll be the benchmark used for the power delivery charges all other ComEd customers will pay in 2005, when the utility's "bundled" rates are no longer frozen. Setting the rules "The company is very much aware of the fact that the rules for the future are getting set now," says William Abolt, commissioner of the city's Department of Environment. "Basically, the next 36 months are going to set an awful lot of the fees for the future." Mr. Abolt says the audit request is one option the city has to pressure ComEd into opening its books, but says it wouldn't be necessary if the company agreed to do so voluntarily. A ComEd executive says the data will be made available to those who sign a blanket confidentiality agreement - which intervenors in the case, including the city, aren't likely to sign. Ms. Juracek of ComEd says the utility already has sifted extraordinary costs associated with its $1.5-billion infrastructure upgrade out of the rate base. But she allows that most of those are minimal tree-trimming expenses. Large amounts of overtime paid to unionized workers, as well as contractor expenses, are included in the rates. "There's no free lunch here," she says. Says Mr. Abolt: "Now, it's time to sort that all out. So, let's sort it out." David I. Fein Piper Marbury Rudnick & Wolfe 203 North LaSalle Street Suite 1500 Chicago, Illinois 60601 phone: 312-368-3462 fax: 312-630-7418 e-mail: david.fein@piperrudnick.com ____________________________________________________________________________ The information contained in this communication may be confidential, is intended only for the use of the recipient named above, and may be legally privileged. If the reader of this message is not the intended recipient, you are hereby notified that any dissemination, distribution, or copying of this communication, or any of its contents, is strictly prohibited. If you have received this communication in error, please re-send this communication to the sender and delete the original message and any copy of it from your computer system. Thank you. For more information about Piper Marbury Rudnick & Wolfe, please visit us at http://www.piperrudnick.com ____________________________________________________________________________
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