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Illinois Commerce Commission Allows Controversial Decoupling Pilot Program
J. Mijin Cha on February 14, 2008 - 7:44am
Decoupling increased utility profits from increased energy use is a key policy for promoting energy savings. Yet, some proposals, like the four-year decoupling pilot program just approved by the Illinois Commerce Commission (ICC), may just be masking abuses of consumers under the guise of energy conservation.
The new Illinois program would allow the natural gas company Peoples Gass to charge customers a new, pre-set fee regardless of how much natural gas they use. In an editorial, Desiree Rogers, President of Peoples Gas, pointed out the benefits of decoupling, highlighting that the utility will collect only an amount that has been approved by the ICC regardless of how much natural gas is used. Therefore, Peoples Gas has a strong incentive to encourage conservation of natural gas to decrease its fixed costs while still retaining a profit margin.
However, the decoupling plan adopted by the ICC is accompanied by a distribution rate increase of $71 million. Further, the Illinois Attorney General opposes a key rider in the rate proposals that could impose surcharges on customers for the delivery of gas they did not use- giving the utility extra profits, especially when customers use less gas. This distorts the original policy behind decoupling and hurts consumers, as the Citizens Utility Board Executive Director David Kolata said,"First they (consumers) get hit with a big rate hike. Then, if they try to save money through conservation, they will be penalized with higher usage charges." The watchdog group is appealing the decision.
Like a Duke Energy proposal that we previously highlighted, the recent ICC decision seems to be only for the benefit of the utility: set profit rates without any risk of return. However, decoupling was meant to encourage conservation while protecting consumers from large rate hikes. Oregon, for example, also decoupled their natural gas utility and the rate increase to customers was $0.00767 per therm. In Illinois, by contrast, rate payers will face an average increase of $7 per month just in usage charges and the utility's authorized return on equity was increased to over 10%.
The Illinois example highlights what happens when utility interests dominate energy reform initiatives: new programs that punish consumers from all angles.