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Residential Pilot Programs: Who's Doing, Who's Dealing?

Fortnightly Magazine - January 1 1997

the state. Six ultimately entered the market.

Yet, just months later, nearly all the suppliers had dropped out of the utility-proposed pilot. QST Energy, CILCO's affiliate, had captured all but 4 percent of the 700 customers choosing to leave the utility. And Wheeled Electric and the state's Citizens Utility Board (CUB) were meeting in a series of sessions mediated by the Illinois Commerce Commission (ICC) to resolve complaints against CILCO and QST.

"They cheated in the pilot program," says one supplier. "You don't get 96 percent [of the market] because you're lucky."

"Nobody can say that," responds Viets, also CEO of QST Enterprises, QST Energy's parent. "We did not cheat."

The mediation sessions failed. ICC chairman Dan Miller predicted the matter would only be resolved in litigation before the commission.

In the CUB complaint filed August 23, and in a similar complaint filed by Wheeled Electric five days later, the parties alleged, among other charges, that CILCO had given its affiliate QST a head start on the residential sites; that QST leased and opened energy stores about two months prior to the pilot's rollout; that QST advertised as CILCO's "sister company" giving the same reliable service; and that as many as 15 out of 16 QST employees moved over from CILCO to QST, including its president.

Viets countered most of the claims, saying there was no advanced notice of sites. He did say QST was staffed largely by transfers from the utility. "I don't know what the exact numbers were ... certainly more than half."

CUB and Wheeled Electric, as part of a proposed remedy, wanted to expand the pilot to more customers and exclude QST from the territory.

During mediation, "CILCO essentially said, 'no, we're not opening it up to any more people,'" says Tony Visnesky, the ICC's energy programs division manager. "They didn't think it was appropriate for other parties to dictate the terms and conditions of their experiment."

Yet despite the predictions of ICC chair Miller, a surprise settlement came almost exactly two months after the complaints were filed. Both CUB and Wheeled Electric agreed to drop their petitions. CILCO said it would add as many as three more residential electric retail wheeling sites, with at least 2,500 more customers. Power was set to flow this February.

Expanding the pilot seemed like the only concession the utility had made, but according to the private settlement agreement, a copy of which was obtained by PUBLIC UTILITIES FORTNIGHTLY, QST also must "not refer to itself as a 'sister company' of CILCO."

In interviews prior to the settlement, the parties spoke about issues the case raised. The issues are unlikely to continue to be debated by the ICC, given the larger concern of restructuring overshadowing this year's commission and legislative sessions.

Miller says he was "extremely gratified" by the settlement. "It shows that CILCO and CUB and Wheeled Electric are all aiming at the same thing. Which is how a competitive market works."

Others might disagree strongly with that opinion.

But few states, Miller says, are as progressive as Illinois in electricity.