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Small Panel, Major Players: Five decision-makers at IL Commerce Commission in crossfire

Over the past few months, the controversy pitted the huge utilities against the state's top legislative leaders. Regardless, the commission had to enact rules under existing law.

The Illinois Commerce Commission keeps a relatively low profile. That is, until it finds itself in the middle of a public firestorm.

The prospect of higher utility bills sparked the most recent controversy for the commission as a decade-old state law freezing electric rates went off the books. In the coming months, the cost and configuration of telephone service could generate noise because state regulation of the communications industry is set to expire, too.

More often, it seems, the five-member commission is caught in the political crossfire simply because the commodities and services it oversees are vital to daily life and to the state's economy. Major corporations have huge stakes in each and every ruling. As do consumers.

So who are these decision-makers? 

At the moment, they include a former energy expert, a former school superintendent and a former assistant attorney general. The current chairman, Charles Box, is the former mayor of Rockford. 

Three of the commissioners are Demo-crats — the maximum number of members allowed for any one party — and one commissioner is a Republican. A vacancy came open this month, and it will be up to the governor to make that five-year appointment, subject to Senate approval. 

Four of the commissioners make $99,414 a year. The chairman pulls in $113,836.

Commissioners aren't required to have particular expertise, but they have nearly 300 specialized analysts, engineers and administrative law judges at their disposal. Nevertheless, as a group, they've shown considerable foresight on technological advances over the decades, even joining a handful of commissioners in other states at beating the feds to the punch on deregulation of the communications market in the mid-'90s.

In fact, being a generalist might be an advantage for the member of a panel charged with making decisions that affect the services consumers use to flush their toilets, plug in their toasters, heat their buildings, access the Internet, move the family or ship nuclear waste. Such decisions are bound by state law, of course. In theory, the commissioners are insulated from the political fray. 

That's not to say their decisions don't have political ramifications. 

"Any change is going to engender political discussion," says Beth Bosch, commission spokeswoman. There's no surprise there, she says, "but the fact is, we have to do what we need to do [under] the law."

In fact, the commission's job is defined by the state's 1921 Public Utilities Act. But the scope of its responsibility has been expanded since 1871, when the Railroad and Warehouse Commission was created. Over the decades, the legislature has gradually added to the commission's purview: railroads, electricity, natural gas, water and sewer, telecommunications, moving companies and even some homeland security.

The electricity rate increases scheduled to begin last month offer a prime example of the controversial decisions commissioners have made. Power regulation generates so much political heat because the commodity is so essential.

"It is the engine that drives the Illinois economy," says former commissioner Kevin Wright, whose term ended last month. "If you lose your telephone service at home, it's an inconvenience. 

If you lose your electric service, it's catastrophic. The politics of it, the importance of electricity, has raised this to a much more visible and more difficult level [in the] transition away from the old way of doing business."

The major change is in the way power is purchased, says Martin Cohen, former director of the consumer watchdog group Citizens Utility Board. Cohen served six weeks on the commission until the Senate rejected his appointment over an argument that he was too consumer-oriented to be objective. Now he is Gov. Rod Blagojevich's director of consumer affairs.

"This whole discussion is not about the way power flows. It's about the way money flows," Cohen says. "And the power plants that we will be buying from [this] year are the same power plants we were buying from last year, regardless of who your supplier is."

The electric power suppliers are the major utilities. Commonwealth Edison in northern Illinois and Ameren Corp. in Illinois south of Interstate 80 distribute power to 95 percent of the state's electricity customers, according to Harry Stoller, director of the commission's energy division.

These Illinois utilities are connected to even bigger industry players. Exelon Corp. is the parent company of ComEd. Ameren Corp. has three Illinois subsidiaries, AmerenCILCO, AmerenCIPS and AmerenIP. 

While a federal commission regulates the parent companies and has made it harder for them to manipulate the energy market to benefit their smaller subsidiary companies, the Illinois commission operates within those larger economic and political forces.

Lt. Gov. Pat Quinn, for one, says the commission dropped the ball by setting electricity rates through a type of auction he — and Attorney General Lisa Madigan — believes violates the intent of the 1997 state utility deregulation law and resulted in a bad deal for consumers.

"I think this is the biggest [issue to face] Illinois and really for the next generation," he says. "It's a huge battle, and it's going to define who really calls the shots in utility matters. Is it a powerful couple of companies with highly paid, millionaire executives, or are the people of Illinois going to have a say-so?"

The regulatory environment was different a decade ago, and the commission has had to react to forces that are out of its control — federal regulations, industry changes and economic trends.

Ten years ago, the Illinois commission oversaw all-in-one power companies that generated, transmitted and distributed energy. But the 1997 state law allowed Illinois utilities to sell off their power generating assets, which relieved the commission from overseeing the cost of nuclear, coal and gas-fired power plants.

About the same time, federal regulations reshaped the state's "electricity footprint," says Bosch, the commission spokeswoman. 

Utility companies now purchase power from unregulated generating companies and deliver that power to retail customers. Further, federal rules now allow power companies to ship electricity across state borders. This has created an industry that is regulated more at the federal and regional level. 

In effect, the Illinois commission has largely been reduced to overseeing the resale and delivery of power to retail customers, says former Commissioner Wright.

Appointed in 2002 by Gov. George Ryan, Wright says the 1997 law did at least three good things. First, it decreased residential electricity rates by 20 percent and froze them for nine years to protect customers from volatile energy prices. Second, it shielded customers from inefficient power companies that were plaguing the industry at the time by shifting the companies' operating and new construction costs to investors and shareholders. And third, it required utilities to join independent, nonprofit organizations that operate a regional transmission grid and manage competitive wholesale electricity markets.

But Wright also says he counts three possible mistakes. He believes electricity rates were frozen for too long without a gradual transition to market-based rates, which he says could have eased the rate shock and encouraged more competition. 

Two, he says it's more difficult now for the commission to detect anti-competitive behavior within state borders. That's because the federal commission regulates competitive wholesale power markets, where utilities buy power for retail customers. The state commission only oversees the rates utilities charge, the utilities' purchase of power and the reliability and maintenance of the delivery system.

And three, Wright says the law may not have gone far enough in separating the state-regulated delivery utilities from their unregulated parent companies and their generating affiliates, something that he says could help prevent preferential treatment at the expense of consumers.

Over the past few months, the controversy pitted the huge utilities against the state's top legislative leaders. Regardless, the commission had to enact rules under existing law. 

For instance, the commission took steps to allow companies to offer a phase-in for customers' electricity rate increases. Meanwhile, three top legislative leaders pushed two competing pieces of legislation that grabbed headlines. One would freeze electric rates again; the other would phase in the rate increases while changing the Illinois commission's ability to review rates. If either proposal becomes law, it will be up to the commissioners to interpret it and determine the best course of action.

"We have to take what's in records before us as judges do and make a decision," says Chairman Box. "But being a commissioner is more of a balancing act. What's in the best interest of the consumers, and, at the same time, the impact that it would have on the businesses that we regulate?"

Even after the utility debate subsides, the commission is required to review last September's energy auction, a process that deregulated the way utilities buy and distribute electricity to residents and businesses. The new system requires utilities to buy electricity at market-based rates, a cost they can pass on to consumers. As Bosch says, "Very few things are ever really over."

Meanwhile, expiration of the telecommunications law will force lawmakers to decide whether it needs to be rewritten to reflect changes in technology. That could cause another industrial-sized political debate.

Currently, the commission only regulates basic telephone services, but even that's not black and white anymore.

"The fundamental question of what is telephone service is up in the air," says Cohen, the former CUB director. "Right now, we have a national policy of very light-handed, if any, regulation of all things digital. Well, everything will be digital soon enough, and that raises questions about whether there's a need or a will to regulate phone service in the future and at what level."

There's already a push for deregulation from such major companies as AT&T, says Box. Four months ago, the commission declared that Chicago-area telephone services were competitive enough to lift state rate controls. The commissioners' 5-0 vote defied opposition from such consumer advocates as CUB and the Illinois attorney general's office, which feared low-income customers would be forced to pay higher prices for basic telephone services.

Legislators could decide whether to follow in the footsteps of Indiana, which created a statewide video franchise, allowing telecommunications companies to buy access to local wires through the state rather than through individual municipalities.

The major telecommunications players, then, might apply pressure to keep up with Indiana's deregulated market, which they find more attractive for doing business than Illinois' regulatory environment. On the other hand, such consumer advocates as the Citizens Utility Board and the Illinois attorney general will continue to be a voice for the low-income consumers who would be affected by higher prices under a deregulated phone industry.

Telecommunications has the potential to generate another heated debate among some of the largest political and industry players — and plenty of controversy for the commission. 

 

Electricity rate freeze stalls in the legislature

While residents and businesses faced higher electricity bills last month, the Illinois legislature debated two competing measures to ease their burden.

The first measure was intended to freeze electricity rates for three more years — on top of the nine years they had been frozen. But that measure stalled in the Senate last month. House Speaker Michael Madigan and consumer advocates supported a rate freeze to negate increases under a type of energy auction that deregulated the way utilities buy and distribute electricity to retail customers.Senate President Emil Jones Jr. supported a different plan to phase in the rate increases for all electricity consumers between 2007 and 2009. Part of the plan would allow utilities to collect some money from consumers in the form of new fees, which utilities say would help them maintain reliable services and repay bond debt.

The absence of legislative action means customers' electricity rates will increase, but residents, small businesses and municipalities still have the option of phasing in the higher costs with interest. They would have to repay the deferred amount between 2010 and 2012.

Bethany Carson

 

The decision-makers

The Illinois Commerce Commission has five members appointed by the governor for five-year terms. They come from a variety of backgrounds but oversee some of the state's most complicated industries.

Chairman Charles Box, Democrat
Appointed: January 2006 by Gov. Rod Blagojevich. Term ends January 2011.
Home: Rockford

He has served 20 years in Rockford's government as mayor, city administrator and legal director.

Commissioner Lula Ford, Democrat
Appointed: January 2003 by Blagojevich. Term ends January 2008.
Home: Chicago

She is a former math and science teacher, a school principal and a superintendent for Chicago Public Schools. She became assistant director of Central Management Services under Blagojevich in 1999 before being appointed to the commission.

Commissioner Robert Lieberman, DemocratAppointed: February 2005 by Blagojevich. Term ends January 2010.
Home: Chicago

He formerly managed the Division of Energy and Environment Assessment for the Illinois Department of Natural Resources. He also spent 18 years as director of the Office of Research and Planning, manager of the Energy Planning Section and policy analyst for the Office of Coal Development.

Commissioner Erin O'Connell-Diaz, Republican
Appointed: April 2003 by Blagojevich. Term ends January 2008.
Home: Bull Valley

She served as an assistant attorney general in the General Law Division of the Illinois Attorney General's office. She oversaw such cases as construction contracts and prisoner civil rights. In 1991, she was appointed an administrative law judge for the Illinois Commerce Commission and became assistant director of the division. She also chaired the Chicago Bar Association's Public Utility Law Division.

Former Commissioner Kevin Wright, Independent
Appointed: September 2002 by Gov. George Ryan. Term ended January 2007. He could be reappointed.
Home: Springfield

He previously served under two Republican administrations, including 10 years with Gov. James Thompson, seven years with Secretary of State George Ryan and a few years with Ryan when he became governor until Wright joined the commission. As a commissioner, he became president of a regional committee of 14 Midwestern public utility commissions that serves as a regional voice on transmission issues pending before the Federal Energy Regulatory Commission at the Midwest Independent System Operator.


Illinois Issues, February 2007

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