Customers pay for utilities' lawyers and corporate donations. Advocates
want to change that.
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[February 16, 2024]
By ANDREW ADAMS
Capitol News Illinois
aadams@capitolnewsillinois.com
Illinoisans pay tens of millions of dollars each year to utilities to
cover costs they accrue for lawyers, belonging to trade groups, making
charitable contributions and purchasing advertisements meant to boost
utilities’ public image.
Consumer advocates are pushing for a change to state law that would bar
utilities from collecting money from customers for those expenditures,
liability insurance covering executives and for the cost associated with
filing rate cases. The bill also explicitly bans charging customers for
political contributions, a practice already disallowed in Illinois.
The proposal, contained in Senate Bill 2885 and House Bill 5061, is
backed by AARP Illinois and the Citizens Utility Board, a nonprofit
created by the General Assembly to represent customers in front of
utility regulators.
The bill would also require public hearings, like two held last year,
whenever a gas, electric, water or sewer utility requests a rate
increase. Rate cases, which generally take a year to complete, are
currently conducted primarily online through written testimony from
utilities and advocates as well as written comments submitted by members
of the public.
An analysis from CUB found that last year, companies spent about $28
million for legal representation, expert testimony and other costs
accrued in six Illinois Commerce Commission cases that resulted in
electric and gas rates going up for most Illinoisans. The state’s two
largest water utilities, Aqua Illinois and Illinois American Water, are
going through rate cases right now, which could cost the companies about
$3.2 million in expenses.
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But since rate cases are required by state law, utilities argue such
expenditures are necessary costs of doing business.
A representative of Commonwealth Edison, the electric utility for most
of northern Illinois, argued that the state’s current regulatory process
ensures that “no unreasonable or imprudent costs” are passed to
customers.
“As a regulated utility, ComEd must demonstrate to the Illinois Commerce
Commission that the investments it recovers from its customers are
prudent and reasonable,” spokesperson Shannon Breymaier said in a
statement. “In months-long processes in which consumer, public interest,
environmental, and governmental groups participate actively, the ICC
reviews our costs and rates.”
In total, the proposed legislation would reduce the amount of
“recoverable” costs – meaning costs chargeable to customers – for the
six largest Illinois utilities by $45 to $63 million annually, according
to a CUB analysis.
Representatives of several utilities that reviewed costs calculated by
CUB said they are in the right ballpark. But some companies took issue
with some of the group’s methodology, noting that some costs, like
insurance and some membership dues, seemed larger than their own
calculations.
Reforming what costs utility customers pay for has been a consideration
for Illinois policymakers for several years.
In 2020 – amid the early stages of a bribery scandal at ComEd that would
eventually lead to its CEO’s conviction on felony charges and bring down
former Illinois House Speaker Michael Madigan – Gov. JB Pritzker laid
out an eight-part outline for energy policy and ethics reform.
Parts of that plan would eventually inform the 2021 Climate and
Equitable Jobs Act and 2022 Reimagining Energy and Vehicles Act, both of
which the Pritzker administration celebrates as major policy wins.
But one element of that plan has yet to come to fruition: a prohibition
on utilities recovering costs for charitable contributions from
ratepayers.
These charitable contributions, according to Pritzker’s 2020 policy
statement, were often used “to curry favor with elected officials.”
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“Utility company charitable donations should be exactly that –
charitable,” Pritzker’s office said at the time. “They should come from
the pockets of the corporation or their executives, not from the pockets
of ratepayers.”
The governor has not taken a position on the legislation pending in
Springfield.
Analyses from WBEZ in 2021 and the Chicago Tribune in 2015 found that
some charitable contributions from ComEd went to politically influential
nonprofits and groups that advocated for the utility’s interests,
although the company denied exerting political pressure on its grantees.
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The headquarters of Commonwealth Edison, one of the state’s largest
utilities, is pictured in Chicago. (Capitol News Illinois file photo
by Andrew Adams)
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ComEd’s Breymaier told Capitol News Illinois the company is proud to
support organizations that improve workforce training, protect the
environment and provide social services. She also noted that regulators
review all spending, including those contributions.
David Schwartz, a spokesperson for Chicago-area gas utilities Peoples
Gas and North Shore Gas, noted that the ICC capped the amount of
charitable spending the companies could charge to customers at about
$4.5 million.
The consumer advocates pushing for this legislation stressed that they
are not seeking to end utilities’ charitable contributions, but rather
to require that shareholders bear the cost.
“We’re not opposed to charity, it’s a great thing,” Jeff Scott, AARP’s
associate state director, said. “But it should be coming out of
shareholders' pockets. Plain and simple.”
Nationwide, Illinois is one of a few states that allow utilities to
charge customers for charitable contributions, according to Matt Kasper,
deputy director at the pro-renewable Energy and Policy Institute.
“Illinois really stands out for allowing this practice to continue to
the level it’s happening right now,” Kasper said.
The number of states reexamining what costs utilities can recover is
growing. Last year, Colorado, Connecticut and Maine all passed laws
banning certain expenses from being charged back to ratepayers –
including charitable giving.
This year, California, Virginia, Maryland, Arizona, Ohio and New York
all introduced legislation similar to Illinois’, according to Kasper.
Utilities can also exert influence through membership in trade
associations, such as the American Gas Association and Edison Electric
Institute.
Each year, Illinois electric and gas utilities spend $6.5 million in
membership costs to trade associations, chambers of commerce and other
civic groups, according to CUB.
Two years ago, EEI advocated for the Federal Energy Regulatory
Commission to revisit its policy on granting utilities “right of first
refusal” for transmission line construction and this year it filed
comment with the Environmental Protection Agency over clean air rules.
The AGA also regularly supports policies favorable to the gas industry,
such as last year when they offered comments to the Department of Energy
and Pipeline and Hazardous Materials Safety Administration.
Utilities also pay for “goodwill advertising,” another category of
spending that would be banned under the proposed legislation.
“The goodwill advertising is basically brand recognition and creating
general warm and fuzzies about your company that also happens to be a
regional monopoly with no competition, by statute,” Eric DeBellis, CUB’s
general counsel said in an interview. “This is effectively a form of
lobbying directed at the public, so you’re paying for them to try and
make you like them.”
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Peoples Gas’ Schwartz and representatives of Ameren and Nicor echoed
ComEd’s spokesperson in their defense of the companies’ spending.
“Regulators always closely examine all of our costs, including
charitable contributions,” Schwartz said in a statement. “We are
committed to serving Chicago and the northern suburbs, including
non-profit community organizations.”
A representative of Ameren Illinois, which operates as both a gas and
electric utility for much of central and southern Illinois, noted that
the company makes investments in “organizations and causes that build
stronger communities and support a better quality of life for our
customers.”
Nicor Gas spokesperson Jennifer Golz also added that the northern
Illinois gas utility provides funding to charities, including to its own
emergency assistance program administered by the Salvation Army, without
seeking to recover the costs from ratepayers.
Capitol News Illinois is
a nonprofit, nonpartisan news service covering state government. It is
distributed to hundreds of print and broadcast outlets statewide. It is
funded primarily by the Illinois Press Foundation and the Robert R.
McCormick Foundation, along with major contributions from the Illinois
Broadcasters Foundation and Southern Illinois Editorial Association.
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