Two Midwest utilities are smarting after the Illinois Commerce Commission issued new rulings: Ameren Illinois had its smart grid proposal rejected by the ICC, and Chicago-area giant ComEd had its revenues cut by $169 million for 2012.
In Ameren Illinois’s case, the commission voted 5 to 0 to send the plan back to the utility because the $625 million proposal lacked the required details and did not clearly show how the new technology would benefit consumers. Ameren has not indicated what its next step will be, but a spokesman said the company is looking forward to cooperating with the ICC. That’s a sure sign that it will return with a new proposal that satisfies the need to show clear benefits to consumers.
Citizens Utility Board, a consumer watchdog group, had opposed Ameren Illinois’s plan as weak on specifics, and its previous arguments appeared to have had at least some influence on the commission’s ruling.
Meantime, the ComEd ruling is more complex. For 2012, the reduction in revenue to ComEd will hurt the company’s bottom line. ComEd says in a regulatory filing that the ruling will cost parent Exelon Corp. 16 cents a share this year, and an additional 8 cents to 10 cents per share in 2013 and 2014. For ComEd customers, however, the ruling is expected to mean lower rates in 2012. But a new rate structure, which went into effect late last year, will allow for higher rates starting in 2013 when consumers are expected to pay $3 more a month, on average, as the utility continues its $2.6 billion smart grid upgrade over 10 years. So, while ComEd loses expected revenue in the near-term, it will still get to recover costs with higher rates later on.
The new rate structure – based on a complex formula aimed at encouraging smart grid investments – is itself controversial. Previously, the ICC had full authority to reduce ComEd rate hike requests, but now the commission plays a lesser role. The ICC can still question costs, but cannot change the formula for determining how those costs are calculated, according to a Chicago Tribune report.
These two decisions by the ICC show how difficult the path ahead can be for utilities embarking on smart grid projects, at least in Illinois. Incomplete or vague proposals will not cut it, as regulators and consumers continue to take a hard look at how smart grid investments will – or will not – benefit consumers. And, similarly, regulators are going to keep rate hikes somewhat in check as smart grid deployments move forward. That’s not a surprise, really. It reflect the ongoing push and pull between private utilities driving new technology and regulators doing what they can to allow for innovation while protecting broad public interests. The road can be bumpy for all the players, but in Illinois, where I once lived, that’s expected.
Tags: Digital Utility Strategies, Policy & Regulation, Smart Grid Infrastructure, Smart Grid Practice, Smart Meters
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