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<< Return to Page One What is really in ratepayers interest?
It is the norm for regulators and other interveners to seek to reduce the amount of
But there is a broader picture that regulators need to keep in mind as they deliberate over major cases such as the EIMA projects. Unfortunately, utility rates are not set in a vacuum and there are numerous implications of ratemaking decisions. At the end of the day, the utilities are like any other private business ‒ they have investors and creditors who make impersonal, fact-driven decisions with respect to stock and debt instruments.
Both the ardent advocates at the Symposium this week and the Illinois General Assembly need a modernized grid ‒ and ComEd and Ameren are the delivery vehicles. Both have explained that absent fair and timely recovery of their investment they will not be able to attract the billions in capital necessary to underwrite the program. In response to the question, “why is rate recovery and regulatory so important?” Richard Mark, CEO of Ameren Illinois responded "it's the costs, utility investment is capital intensive, you cannot go to a utility board of directors and advocate for an investment without knowing how costs are going to be recovered.”
Without the investment there is no modernization, i.e. consumer empowerment, enhanced reliability. Of course without the modernization, the expected new jobs do not materialize either.
The end of the new bargain?
This goes to the essence of what the EIMA legislation was about ‒ a new regulatory framework, a new bargain that entailed clear and timely cost recovery in return for greater performance and accountability. A “regulatory test bed” if you will, where old ways (year to year contested rate cases) give way to a dynamic environment focused on performance, accountability and clarity.
As it stands today the smart grid renaissance in Illinois faces tremendous uncertainty. The utilities that can deliver its core components must now fight for the cost recovery promised in the legislation. It is a startling contrast between the energy and enthusiasm of the Symposium and prospect that it all could be brought to a halt in a hearing room.
As Anne Pramaggiore said this past week, “the cultural change” implicit in a grid modernization project is far more daunting than the technology. She could not have been more perceptive. Utilities around the globe are finding that technology adoption presents tremendous change and many long established ways of doing business no longer fit. Looking at the politics in Illinois, it is clear that cultural change is indeed the greater challenge to a modernized grid.
David O’Brien is a former Vermont Commissioner of Public Service and is now a strategic consultant to utilities at the BRIDGE Energy Group. He is presently consulting to ComEd on regulatory matters.
More from Illinois…
Ratemaking landmark: Illinois approves new way to set electric rates
Steal this idea! Illinois takes steps to become a major smart grid hub
ComEd smart grid deal: profits tied to performance
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