Future shock
Post Dispatch
Tuesday, Mar. 20 2007

The biggest energy problem facing regulators and lawmakers in Illinois isn't
deflecting the anger of constituents outraged by skyrocketing electric bills.
It isn't the layoffs threatened by utility giant Ameren Illinois, which will be
the subject of a hearing before the Illinois Commerce Commission in Springfield
today. Nor is it timing of last week's announcement that the utility's bonds
were downgraded to junk status.

The biggest energy challenge is finding ways to keep power flowing this
summer. Unfortunately, there's no indication that crucial point is being
addressed, even during the regular meetings with utilities conducted by state
Sen. James Clayborne, D-Belleville.

On Monday, Ameren Illinois utilities offered to reinstate a $20 million rebate
program that it pulled off the table last week — if the General Assembly vows
not to freeze rates, as both the House and Senate have proposed.

Regardless of how that proposal is received, lawmakers already have
procrastinated long enough. They can't wait for power supplies to be
threatened further before trying to solve some major challenges.

Lawmakers went out on a limb when they approved deregulation a decade ago.
States that preceded or followed Illinois onto that limb now are finding
themselves in a similar position: buckling under high electric rates with no
clear path back. Even Scott Cisel, president and CEO of Ameren's Illinois
utilities, called for re-regulation for consumers and small businesses in a
commentary published over the weekend.

Last year, Virginia began moving back toward re-regulation with a plan
developed and supported by utility companies. But Virginia didn't require power
companies to spin off generating plants as Illinois did. Regaining control of
electric rates will be more difficult here, and there's no good model to follow.

Last month, the Illinois House approved a bill to roll back rates and freeze
rates for three years. The measure also puts the state on the road to
re-regulation. But the Senate, which balked at a similar House bill in January,
countered with a plan for a one-year freeze that doesn't address re-regulation.

Meanwhile, the comically inept ICC, which approved the wholesale electric
auction that produced these high rates, has launched several largely
meaningless investigations, including today's hearings on the layoff threat.

Illinois government needs to move forward on several fronts.

Closing the gap between what customers pay and what power costs should be
lawmakers' highest priority. A rate freeze of any length means electric
companies will pay more for power than they can charge customers. Legislative
leaders should be meeting with power companies now to avert bankruptcy and the
disruption of service to hundreds of thousands of customers. Companies may be
able to get out of inflated long-term power contracts, but that means they'll
have to buy electricity on the more expensive spot market.

Gov. Rod Blagojevich and the General Assembly must demand accountability from
the ICC. Even as lawmakers were in crisis mode last month, ICC member Erin
O'Connell-Diaz was in Washington telling federal regulators how well
deregulation is working in Illinois. The ICC can't have it both ways,
investigating high electric rates while touting the success of deregulation.
The commission repeatedly has mishandled steps toward deregulation. It
certified that competition exists for retail customers when it clearly doesn't.
It also designed the wholesale auction process that Attorney General Lisa
Madigan has challenged as being open to collusion and bid-fixing. The ICC
itself should be the subject of legislative hearings.

It's obvious that the General Assembly lacks the expertise to fix the mess it
has created. To be fair, it's a complicated subject. But there are experts who
could advise the state and help it get back on track. Lawmakers should create
an independent commission to develop recommendations for re-regulating electric
utilities. Illinois consumers and power company employees — who vote, after all
— will thank them.