Exelon and Constellation Energy have won approval for their merger, but now they must live with the terms of the deals cut to win that approval and also deliver on the smart grid performance metrics imposed in a recent legislative contest of wills.
The political brawl that played out in Illinois from the legislative battle over smart grid is typical of the Land of Lincoln where everything is political and everything has its price. But while the outcome is not what was planned or predicted it may end up being an interesting lab experiment on whether smart grid can earn its keep.
In full disclosure I spent five years working for the Illinois Commerce Commission as Manager of its Public Utilities Division and then my last year as General Manager of the agency. I learned to navigate the Illinois political calculus including “freeze exceptions” for hiring state employees which served as a pretext to send me a list of patronage candidates to consider. If I agreed to hire one from the list I got my freeze exception. If not I had to wait. I was never forced to hire anyone but there clearly was a cost for not doing so.
I also learned that just because utilities were regulated by the Illinois Commerce Commission did not mean they were helpless subjects to be trifled with. There was always a political way to fix a problem. That is the situation with Exelon’s need to move forward with smart meter deployment and smart grid implementation. It was not a matter of whether this was a good idea only how much it would cost to implement—and to win the approval needed to do so. Ameren thought it could piggyback on a good deal and ended up being caught in the crossfire.
The problem was smart meter deployment got caught up in other issues including anger over power outages from storms that made customers mad and put politicians on the defensive. Then Governor Pat Quinn, an unabashed ratepayer advocate and frequent opponent of utilities for more than 30 years, played his role true to type. Then there was the utilities fear that the ICC might not approve their smart meter costs as “prudent” after the fact so they wanted approval in advance. No dice said the Commission. Add to that the political sparing between the Governor and Legislature and you have the classic makings of a Chicago-style food fight.
When the utilities went to the Legislature over the heads of the ICC to get legislative approval—the fight was on! Everyone who wanted or needed to score points found reasons and ways to do so. Governor Quinn scored by vetoing the bill. Take that!
But that enraged the Legislative leaders who cobbled together another political deal with a veto-proof majority and sent it back to the Governor. To get that veto proof majority the trailer bill, as these things are called, was loaded with favors for those who delivered the votes to rub the Governor’s nose in the mess.
But a funny thing happened–the bill finally passed sets performance standards for smart grid implementation! In street language this might be called “stink control” in the halls of the Illinois General Assembly this is getting the people’s business done.
So the utilities (Commonwealth Edison and Ameren) will get their smart grid deployment but the amount was reduced from $3.2 billion to $2.6 billion and they must spend one-half on upgrading the transmission grid to reduce power outages.
Yes customers will pay more—that was never in doubt. But while the performance metrics have more to do with predefining the terms of regulatory approval to reduce the discretion the ICC may exercise, they do make Illinois one of the few states with such bold, legislatively approved performance metrics. Stay tuned to see how this works out before judging whether Illinois is setting a model for anyone else to follow.
The price the utilities are paying for this new ‘model of smart grid accountability’ is that they must use the smart grid approved revenue to fix the outage problems that give politicians headaches AND THEN still perform to make smart grid work.
- EIA: Smart Grid Legislative and Regulatory Policies and Case Studies (bespacific.com)
- Top 5 Smart Grid Trends of 2011 (greentechmedia.com)
- Smart grid winners, losers (and fence-sitters) 2011 [Earth2Tech] (gigaom.com)
- 3 smart grid trends to watch in 2012 (zdnet.com)