Audit accuses ComEd of overcharging its customers

An independent audit released yesterday, October 10th, alleges that Commonwealth Edison plans to overcharge its customers by up to $160 million a year.

An independent audit released yesterday, October 10th alleges that Commonwealth Edison (ComEd), a unit of Chicago-based Exelon Corporation, one of America’s largest electric utility companies, wants to overcharge its customers by up to $160 million.

The charges relate to repairs ComEd promised to pay for after neglecting maintenance to increase profits, said the Citizens Utility Board (CUB), a group formed by the Illinois Legislature which acts as a voice for residential and small-business utility ratepayers in the US.

ComEd used poor accounting and record-keeping procedures and it was ‘disingenuous’ in claiming that its multibillion-dollar improvements to its system after widespread power outages in 1999 were ‘ordinary and typical,’ according to the audit by Liberty Consulting Group.

The audit focuses on how ComEd measured its operating expenses for the year 2000, a test year in which maintenance and capital spending were abnormally high because ComEd needed to ‘catch-up’ after ‘a long history of under-spending that was not consistent with good utility practices,’ Liberty Consulting said.

Earlier this year, the Illinois Commerce Commission (ICC) ruled that ComEd’s operating expenses had increased by $370 million a year, which would set the stage for future rate hikes to recover the company’s ‘delivery service’ costs of building and maintaining its transmission and distribution system.

However, the ICC ordered the audit, after CUB, the City of Chicago and the Illinois Attorney General’s office, argued that the company was unfairly padding that figure with expenses caused by its neglect.

On Thursday, October 10th, the auditors gave fuel to those arguments by concluding that the $370 million figure should be reduced by up to $160 million. The ICC now will consider the audit and make a final decision on whether or not to follow its conclusions.

‘The audit proves what we’ve said all along – that ComEd neglected its system for years and now wants customers to foot the repair bill,’ CUB Executive Director Martin Cohen said. ‘Why should customers pay tomorrow for yesterday’s mistakes?’

Vowing to fix the system after massive blackouts hit the Chicago area in 1999, ComEd President John Rowe promised: ‘This will not cost ratepayers any more money. ‘ However, since then, the company has claimed that Rowe’s comments were ‘not a literal commitment to the public’ but ‘a general conceptual statement for consumption and understanding in the media.’

In the audit, Liberty criticised ComEd for not adequately tracking the costs associated with repairing the major maintenance problems after the 1999 outages.

The company responded that maintenance, construction budgets, lawsuits and other developments following the outages were ‘ordinary and typical of activities for an electric utility’ and thus didn’t require substantial tracking.

ComEd’s ‘delivery service’ case is connected to passage of the 1997 law that restructured Illinois’ electricity industry. Under that law, consumers are allowed to shop around for a new company to supply them with power, but the electricity continues to be delivered through ComEd’s equipment, under state-regulated rates.

However, currently there are no alternative electricity suppliers for residential customers anywhere in Illinois. The deregulation law also freezes rates until 2007, so Illinois customers will be protected from any rate increase until then.