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Regulators Forum: Taming the Utility Frontier

Policymakers are setting sights on new challenges facing utilities.

Fortnightly Magazine - November 2006

deal for consumers.

We are not through with the process. This journey started 10 years ago, with policy decisions that were based on sound economics and the realization that this transition to a competitive marketplace wouldn’t occur overnight. In fact it would be an evolving process, and the supply auction is just a milestone in that road.

Right now we are on a learning curve. The commission has initiated various workshops and forums where we have invited stakeholders to comment about things we should be aware of, and changes we should make. The commission’s Post-2006 Initiative, Energy Solutions Forum and Retail Competition workshops are a few. We are learning new things every day, and our job is not over. We are designing a marketplace for the future, and it must be dynamic and responsive to the participants in the market.

Fortnightly: How might demand-response metering fit into Illinois’ market design?

O’Connell-Diaz: This certainly will be an issue the commission will be looking at in the coming years. The Illinois Legislature recently passed legislation that calls for real-time meters [Public Act 094-0977, enacted June 30, 2006]. We are awaiting filings from the various utility companies pursuant to that legislation. I don’t know what the programs will look like. But real-time metering is part of a menu of items that commissions as well as ratepayers and other stakeholders need. These programs will enable customers to understand how electricity use translates into utility bills and how individual use affects everyone in the service territory.

We will be looking at many basic questions when utilities file their demand-response programs. Specifically we’ll address the question of costs: Will they be socialized to all ratepayers, or just to those who sign up for a particular program? And we’ll study particular metering technologies, to determine whether they will do what they are supposed to do.

Fortnightly: How are commodity-price pressures affecting Illinois utilities’ need to invest in electricity infrastructure? I understand ComEd was less than happy with the commission’s ruling in its recent delivery-service rate case. What should utilities be doing to secure rate recovery?

O’Connell-Diaz: ComEd’s case is going through the rehearing process and is expected to be completed by the end of the year.

Utility companies are required under Illinois law to provide safe and reliable service, and they must spend money to accomplish that goal. But the company must justify the costs, because the money doesn’t fall out of the sky.

Under Illinois Restructuring law, our rates have been frozen since 1995, and in some instances since 1981, in addition to a mandated 20 percent rate reduction. Now, I don’t see anything in my kitchen that costs the same as it did in 1995, and most companies are incurring much greater expenses than they did in 1995.

There are many opportunities to address the cost issues. Any citizen can participate in rate cases at the commission. It’s a very detailed process and everyone has an opportunity to challenge what the company has filed. And it’s not an open-and-shut situation. If a utility isn’t happy at the

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