12/05/16 - CRAIN'S OPINION: Why Rauner Should Veto Exelon's Bailout

By: DAVE LUNDY 

Springfield proved the cynics right last week. Rather than moving heaven and earth to pass a budget, come up with a pension fix or help decimated social services organizations, the General Assembly and governor engaged in an act of what could best be described as “faith-based lawmaking.” What was more important that all those other priorities? Bailing out two failing nuclear plants owned by Exelon, a Fortune 100 company that made more than $2 billion in profit last year. 
  
The 500-plus page “Future Energy Jobs Bill” violates every principle of good government. In the last 24 hours of the fall veto session, lawmakers amended the measure seven different times with amendments ranging from one page to 60. The bill the Legislature passed without even seeing in its final form will probably be around 550 pages—about as hefty as the entire Illinois Public Utilities Act. Illinois ratepayers won't be able to fully analyze what was done to every person, business, hospital and school in the state until a final version is assembled for Gov. Bruce Rauner to sign. This was Springfield at its very worst. 
  
As bad as the process was, what's in the bill is even worse. That's why an extraordinarily diverse coalition of consumer advocates like Illinois Attorney General Lisa Madigan and AARP, business groups like the Illinois Manufacturing Association and Illinois Chamber of Commerce, and an array of other organizations including the Building Owners and Managers Association of Chicago, NAACP and National Federation of Independent Businesses worked together in an effort to stop it. (Crain's Chicago Business also thinks the rare display of bipartisanship was wasted at a great cost to Illinois.)

So what's in the bill? A bailout that provides $2.35 billion to Exelon to keep two nuclear power plants open that can no longer compete in the marketplace. Illinois generates 41 percent more power than we use and as we become more efficient—demand is declining at about 1 percent a year—that excess supply is growing. With so much supply and electricity prices falling, ratepayers have been the big winners. 

But that's the risk of the competitive market Exelon championed for the past 25 years. When prices were high, shareholders won. As recently as 2014, Exelon CEO Chris Crane said, “We're saying we don't want to be subsidized and no one should be subsidized in the competitive markets, so there are a few that may not make it.” With energy prices lower because of cheap natural gas, consumers are winning and company executives don't like it. So Exelon abandoned its competitive principles and ran to the Legislature to seek a government-mandated subsidy at the expense of every consumer and business in the state.

Also in the bill is a drastic change in policy to allow ComEd to earn almost 10 percent guaranteed annual profits on energy efficiency spending. Currently, we invest hundreds of millions each year on a variety of programs and ratepayers pay for these investments as they're made on a cash basis. To date these programs have been partially successful, with ComEd achieving about 35 percent of promised efficiency gains. Improving the programs would be a good step forward, but it can be achieved not by rewarding utility failures with billions in guaranteed profits, but through market-oriented solutions that pay for success. 

JOBS KILLER

With a price tag of more than $10 billion by Exelon's own testimony, the bill, despite its name, is a jobs killer. According to an analysis of the legislation using the industry standard economic modeling tool IMPLAN, this legislation will kill 44,000 jobs, destroy $14.7 billion in economic activity and cost $429 million in lost state and local tax revenue. In fact, this legislation will cost the city of Chicago, Chicago Public Schools and CTA a combined total of more than $10 million each year. 

While proponents of the bill tout “rate caps,” sadly these caps are a sham, gamed by Exelon using technical language to mask artificially high baselines against which caps will be measured. For commercial and industrial customers, the gaming of the rate caps will cost them more than $100 million per year. 
  
For residential ratepayers, the gap between rhetoric and reality is extreme. Exelon has said their bills will go up by no more than 25 cents a month, but that's an average of all residential customers, not individual homeowners. An independent analysis by Illinois' leading energy expert, the Power Bureau, finds the bill will cost the average residential ratepayer an additional $4.54 a month for ComEd customers and $2.01 a month for Ameren customers in downstate Illinois. 

Although he negotiated the final version of the bill, Rauner still has a chance to stand up for business and consumer ratepayers. It's time to honor his anti-corporate bailout rhetoric and veto this massive rate hike for everyone. We urge him to do so without delay. 

Dave Lundy is director of the Best Coalition, a diverse group of consumer, business and energy interests.