Electric Bills on Verge of Quick Cuts Deregulation Bill on Edgar's Desk

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Byline: Don Thompson Daily Herald State Government Writer

SPRINGFIELD - Illinois will get the second quickest guaranteed electric rate cut in the nation if Gov. Jim Edgar signs into law the sweeping deregulation measure sent to his desk this weekend.

And Illinois will become the first Midwestern state to agree to phase competition into an industry that for more than 75 years has been the domain of local monopolies such as Commonwealth Edison.

However, true competition won't begin to emerge until 2002, and it will then be an additional four to six years before consumers can freely choose among electric companies without paying a penalty.

The Illinois House late Friday overwhelmingly sent Edgar the bill approved nearly unanimously by the Senate two weeks ago. Edgar said he will closely examine the nearly 260-page bill before deciding whether to amend or sign it.

"Many eyes are looking on the state of Illinois because of its diversity, because of its nuclear generating capacity and because of the high rates that we've been paying for many, many years," said House Electric Utility Deregulation Chairman Phil Novak, a Democrat from Bradley. "I think we have one of the best bills in the United States of America."

Martin Cohen, executive director of the Citizens Utility Board, called the bill "the most consumer-friendly deregulation bill that has been achieved anywhere in the country. Under this bill, every residential utility customer in Illinois will get a rate cut ... and every residential utility customer will have a choice of electricity providers by May of 2002."

In August, when the first 15 percent rate reduction would kick in, Commonwealth Edison's historically high rates will be below the average for the 10 largest U.S. cities, Cohen calculated. Once the full 20 percent takes effect on May 1, 2002, a typical ComEd customer will save $176 a year.

To the contrary, the bill locks Illinois consumers into the highest rates in the Midwest for the next eight years, said David Stahr, research director for Citizen Action, a competing consumer group.

The General Assembly's decision to push ahead into what could literally be a darkened room comes a week after neighboring Wisconsin opted to wait for other states to experiment with letting competition - rather than state regulators - determine who turns on the lights.

Eight Northeastern and Western states have enacted deregulation laws so far, and three other states are on the verge of joining them. Michigan regulators will begin experimenting with a limited phase-in program next year that would conclude in 2002, just as Illinois is getting under way, but Michigan lawmakers have not yet approved the proposal. Other Midwestern states are preparing to act next year.

"The Midwestern states have not moved all that fast," said Jim Owen of the Edison Electric Institute, a utility association. "I think one of the reasons for that is we've really seen the most regulatory and legislative action in states where the electricity rates are the highest."

For that reason, Illinois negotiators demanded a sharp rate cut. But it's the height of irony that lawmakers should regulate rate cuts even as they are deregulating the industry, said John Mayo, a professor of economics, business and public policy at Georgetown University.

He contends Illinois consumers would see cheaper rates and more efficiency by quickly allowing full competition - which will take place next year in California - or the large-scale experiment in which a third of Pennsylvania consumers will choose their electricity provider starting next year.

Like most other states, however, Illinois is phasing in competition rather than following California's decision to deregulate the industry entirely as of Jan. 1. Illinois is closer to Oklahoma at the other extreme by delaying any residential phase-in until 2002, although industrial and commercial users could start shopping around in 1999. …