CHICAGO - Enthusiasm may have dimmed this week for legislation that would deregulate the electric utility industry in Illinois, following the release on Monday of a critical state Commerce Commission study charging that the bill favors big business.
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The 55-page study says the legislative guidelines for issuing tax- exempt bonds related to deregulation could create unnecessary costs that would be passed on to electric customers.
Moreover, the study said the bill doesn't provide nearly enough checks and balances to make sure the utilities would indeed use bond proceeds to recoup their so-called stranded costs - or debts incurred by utilities when they assumed they would always operate as regulated monopolies.
The report was requested last spring by Senate President James "Pate" Philip, R-Wood Dale. After the deregulation bill cleared the House, Philip put the brakes on it in the Senate.
"We had concerns the bill was moving too quickly," said Philip's spokeswoman, Patty Shuh. "Also, if we had passed the bill, people would have said we were holding out for big business. We're trying to do the right thing."
The commission said the bill is far too favorable to the utilities, and that consumers could ultimately bear far more deregulation costs than necessary. The report called the asset securitization plan "poor public policy."
"It tilts the balance too much toward utilities," said Steve Fetter, a senior director of the global power group for Fitch Investors Service. "In other states, the commerce commissions work closely with legislators. This appears to be a bill worked out between legislators, utility lobbyists," and the utilities themselves.
The report points specifically at plans to allow the state's two largest investor-owned utilities - Commonwealth Edison and Illinois Power - to benefit from $8 billion of tax-exempt debt issuance. That would theoretically pay for transition costs and transfer existing equity and other debt into bond debt.
However, the bill's language is inadequate in making sure the utilities use the bond proceeds for rate reductions and getting rid of other debts, according to the study.
Under the bill, the report said, an electric utility "would not be required to use the proceeds to retire a single dollar of its existing financial obligations," and that it could pass along the proceeds to unregulated company subsidiaries in the form of a stock dividend or repurchase.
Shuh said Philip has made no decision regarding how many of the recommendations from the commission will be taken, or how the bill would be rewritten. She said Senate hearings on the matter could begin in late August or September, when the fall session of the General Assembly begins.
