Big questions surround Ill. electricity plan

SPRINGFIELD — Illinois lawmakers are considering a plan to let electric companies raise their rates to help pay for modernizing the state's power grid.

The 10-year project would establish the "Smart Grid," to be used by all Commonwealth Edison customers and 62 percent of Ameren Services electric customers.

Consumer groups and some state officials, including Gov. Pat Quinn and Attorney General Lisa Madigan, oppose the idea.

Here's a closer look:

Q: How much would my rates increase?

A: ComEd estimates a $36 annual increase, on average. But once the new Smart Grid meters are available, consumers could save 10 percent in the first year and 15 percent in the second year, outweighing the initial price increase. Customers will also receive a refund if utilities generate excessive profits.

The governor, however, claims that at the end of the 10-year project consumers would pay $408 annually.

Q: Does this make any other changes to utilities?

A: About $1.1 billion of the $3 billion plan would be used to improve existing infrastructure. Opponents say that makes it misleading to suggest the legislation is all about Smart Grid.

Q: What is Smart Grid anyway?

A: It's a system to match electricity production with consumer demand. Utilities have difficulty accurately gauging demand at any given moment and often waste energy by generating too much during periods of low use. Utilities have no way to store energy.

Q: How does it work?

A: Consumers would have the option of installing "smart meters" that measure energy use many times per second. Currently, use is measured once every several seconds. The new meters would communicate with the power grid, letting companies know whether to increase or decrease production.

Q: Why are consumers being asked to help pay for this?

A: The recession has made investors skeptical about large financial commitments to such projects. Additionally, many utilities would have to pay high interest rates to borrow money because their credit ratings aren't great. Utilities in many other states have used a combination of borrowing and rate increases, but the Illinois proposal is on a much larger scale than most.

Q: What's the advantage?

A: Potentially, Smart Grid could save consumers money by curtailing necessary energy production during peak demand periods, which is when energy costs are highest. Companies are also developing applications for smartphones and computers that would let consumers schedule their energy use more efficiently. The legislation also requires a 20 percent reduction of blackouts.

Q: Why is this happening now?

A: To upgrade old infrastructure and take advantage of new computer technology. Utilities have needed to upgrade for decades, but their status as regulated monopolies added complications — a lack of competition forcing them to improve and restrictions on how much money they could take from customers to pay for the work.

Events like the 2003 Northeast blackout demonstrate the need for improvements. The blackout was caused by trees rubbing against transmission wires and it hit eight states and the Canadian province of Ontario.

Q: Why are consumer advocates worried about this?

A: They say the utilities would be allowed too much profit, given the limited risk involved. The higher rates, and the likelihood of more, eliminate virtually all uncertainty for the companies. The Illinois Commerce Commission recommends a maximum 10.3 percent profit margin, but the utilities companies want at least 10.5 percent.

Q: Does the law allow rate hikes without state approval?

A: No. An earlier version allowed utilities to raise rates and then go to the Commerce Commission for review, but that was dropped amid an outcry from consumer advocates. But the current bill would shorten the ICC review period from 11 months to 8½ months.

Q: Does the law ever expire?

A: Yes. A review in 2014 would determine whether rate increases exceeded a 2.5 percent annual cap. If they did climb beyond that, the law ends. If it stays within the 2.5 percent cap, the law would continue until 2017. The utilities would then have to ask the General Assembly for an extension if the companies show they need more financing to complete the project, which is scheduled to last 10 years.

Q: What will this do for the economy?

A: Advocates say it would create about 2,500 jobs.