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May 09, 2023

Illinois bill would quash competition for new high

Steve Daniels is a senior reporter for Crain's Chicago Business covering all

Steve Daniels is a senior reporter for Crain's Chicago Business covering all things financial services, including banking, private equity and insurance, as well as energy and utilities.

A bill has bubbled up suddenly in the final days of the Legislature's spring session that could give downstate utility Ameren Illinois a highly lucrative gift and leave Commonwealth Edison in the cold.

There's sudden momentum in the state Senate for legislation that would give Ameren the right to box out competition in its service territory to build any new high-voltage lines.

Illinois is only the latest in a string of states to consider "right of first refusal" bills pushed by incumbent utilities. The effort comes as investment in new transmission wires grows. Federal cash from the Inflation Reduction Act and actions by regional power-grid managers are leading to more spending on infrastructure to connect renewable power sources like wind farms in remote areas to population centers like Chicago.

Utilities, monopoly owners of local power grids, want to exert monopoly control, too, over the portions of interstate power lines within their service territories.

Advocates for competition say these laws will inflate costs of the projects, which could benefit from competitive bidding. Ultimately, ratepayers will cover those costs in their electric bills. Likewise, clean-energy advocates are concerned, worried that inflated costs of needed high-voltage connections will hold back renewable power development as rate shock leads to consumer pushback.

In Illinois’ case, before this year, it would have been unthinkable for Ameren to get such a benefit but not ComEd. That, however, was before ComEd admitted to an elaborate bribery scheme aimed at influencing former House Speaker Michael Madigan and before the recent convictions of the so-called "ComEd Four," including former CEO Anne Pramaggiore, on conspiracy and bribery charges.

Now, lawmakers can't afford to be seen voting for such a lucrative benefit for scandal-tarred ComEd, which not long ago was viewed as the most politically powerful company in the state.

But the same apparently can't be said for Ameren. Legislation to give Ameren a monopoly over future transmission projects was added to an energy bill today. The Senate Executive Committee quickly held a subject-matter hearing on it.

The sudden momentum didn't emerge because of some newfound Ameren clout. Instead, the International Brotherhood of Electrical Workers moved yesterday to make passage of the Ameren bill a high priority in Illinois, sources say, with the international president based in Washington, D.C., making calls to Illinois lawmakers.

An IBEW spokesman didn't have an immediate comment.

Opponents are scrambling to halt the bill's progress.

Rights of first refusal for incumbent utilities "prevents these very large, very expensive transmission projects from being competitively bid," says Paul Cicio, chairman of the Electrical Transmission Competition Coalition in Washington, D.C. "It will result in higher rates."

The coalition, assembled about a year ago as these state bills were beginning to surface, includes dozens of companies, industrial consumer groups and others.

Ironically, Ameren failed to persuade lawmakers in Missouri, where it's headquartered, to pass similar legislation in their spring session, which recently concluded. But Indiana Gov. Eric Holcomb signed a right-of-first-refusal bill into law in that state earlier this month.

Transmission lines are more lucrative for utilities to build and operate than the local distribution wires whose rates are governed by state regulators. Rates of return on transmission are substantially higher than they are for distribution.

In Illinois, we’ve seen turf wars over the issue before. Florida-based NextEra Energy and ComEd went to battle over the city of Rochelle's agreement to sell 20 miles of high-voltage lines it owned to NextEra. ComEd got the Illinois Commerce Commission to block the deal in 2018. Ultimately, ComEd and NextEra agreed to end the standoff by allowing ComEd to purchase the Rochelle lines and then turn around and sell 40 miles of lines it owned in northwest Indiana to NextEra.

It took two years to settle a dispute over 20 miles of power lines. But that wasn't why ComEd went to war. It wanted NextEra, one of the nation's most aggressive and successful power companies, out of its backyard.

NextEra is a member of the transmission competition coalition.

Steve Daniels is a senior reporter for Crain's Chicago Business covering all things financial services, including banking, private equity and insurance, as well as energy and utilities.

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