Rising Illinois energy costs are legacy of Madigan’s corruption
Laws that go around the normal rate-setting process are driving up energy prices for Illinois consumers. These laws were central to the scandal that brought down the nation’s longest-serving House speaker.
Illinoisans who think the Commonwealth Edison bribery scandal and the state policies hiking energy bills are unrelated should ask themselves, “Who is linked to both?”
Hint: it’s the embattled former Illinois House speaker who was recently indicted for corruption over his dealings with ComEd.
Mike Madigan is responsible more than anyone else for forging the state’s complex and costly energy policy during his 36 years in power. Energy bills are one of the focal points of the corruption probe into Madigan’s tenure.
Over 70% of Illinois receives its electricity from Commonwealth Edison. Rates have been increasing annually for some time, despite state government regulating the rates the utility company can charge its customers and the rate of return from its business operations. In theory, state government is supposed to keep the utility in line and work to ensure power costs remain low.
So, what happened?
Under standard operating procedure, public utilities in Illinois are governed by the Public Utilities Act and the Illinois Commerce Commission. Generally, rate increases are limited through ratemaking, which is carried out by means of a “rate case” typically before the ICC.
These cases take time: the ICC has 11 months from a filing to make a decision, so proposed rate increases tend to progress slowly and must meet requirements to increase rates. For years, this has acted as a stopper for large rate increases in every utility governed by the commission, which is crucial considering the near monopoly public utility companies have on their industries.
The ICC is both responsible for electric rate increases, as well as preventing them. With electric producers besides ComEd supplying power to the state, the system has helped keep electric bills lower statewide compared to Illinois’ neighbors and to the national average.
In 2011, ComEd was able to circumvent these safeguards via passage of the Energy Infrastructure and Modernization Act, otherwise known as the “Smart Grid” law. The bill was framed by ComEd as a $2.6 billion smart grid investment plan that included a 4.2-million-unit smart meter rollout, intended to give customers access to real-time data and services to more efficiently use energy. It also created a new regulatory framework structure for consumers to pay for those upgrades.
While these infrastructure improvements are viable methods of reducing energy waste, the new framework has effectively allowed for ComEd to bypass the rate increase safeguards. Since the law passed, revenues from the company’s delivery rates have jumped from a little over $2 billion in 2012 to nearly $2.7 billion in 2019, an increase around 2-1/2 times the roughly 12% rate of inflation during the same period.
The Smart Grid law was expanded in 2016 by passing the Future Energy Jobs Act, which provided even greater benefits to the utility company, and effectively served as a bailout for ComEd’s two remaining nuclear power facilities. According to NPR, records show the legislation yielded more than $935 million in the first four years after it passed. Both of these increases were primarily through deliver-side increases, or the amount that a resident has to pay to have electricity delivered to a home.
Effectively, these two laws resulted in billions going into the utilities’ pockets that had no real business being there. While several of the programs that have been implemented will save energy and help to refurbish Illinois’ energy infrastructure, these programs effectively serve to cover up the new ability of ComEd to bypass existing safeguards to see larger profits. These laws, especially the Smart Grid law, have only served to harm Illinoisans: netting billions for ComEd, while ratepayers are left another burden alongside high taxes and untenable public pension payouts.
The passage of these laws can be laid squarely at the feet of Madigan, who, in both cases, served as the political power to get ComEd legislation through the Statehouse, often building support in exchange for favors from the company. Madigan has been indicted on corruption charges related to helping ComEd pass these laws, and preventing pro-consumer legislation from surfacing. In particular, he has been accused of receiving bribes from ComEd, specifically that ComEd executives arranged jobs for Madigan's political allies where they "performed little or no work" in exchange for Madigan's influence in passing legislation favorable to the utility or defeating legislation that would harm its business, or held internships for applicants from his home district. He even went so far as to kill pro-consumer legislation backed by his own daughter, former Illinois Attorney General Lisa Madigan, to get two political allies jobs with ComEd.
These charges have resulted in radical shifts both in the Statehouse and for ComEd. The company was charged with bribery for steering jobs and other benefits to Madigan and his allies, and agreed to paid out a $200 million fine in exchange for deferred prosecution of the charges. The company has apparently worked to walk back its admission of liability, despite federal prosecutors unveiling a 22-count indictment against Madigan, charging him with racketeering, bribery, conspiracy, wire fraud and extortion.
The good news is Gov. J.B. Pritzker and other state lawmakers have turned against ComEd’s efforts to extend the EIMA’s formula rates past 2024, in no small part because of the allegations of corruption the utility now faces. For the short term, Illinoisians are likely to see their utility bills increase as ComEd tries to leverage the system it created with Madigan before it evaporates.
The Madigan-style corruption that drove up energy rates is still possible in Illinois. While rules and reformswon’t stop it, they will signal state lawmakers are rejecting the old ways and remember who they really work for.