Who is to blame for the upcoming electric rate increase?
As most people now know, starting in January of 2007, electric rates in this area will increase by 40 percent. In 1997, Illinois passed deregulation legislation that was supposed to allow consumers to choose their power supplier similar to the way they choose their long distance phone supplier.
One company would own the distribution system and others would own the generation system or power plants. The distribution companies would contract rates from the generation companies and pass those to the consumer. The consumer would then have the choice to accept that package or shop elsewhere for a different supplier and pay separate bills to the supplying company and the distribution company.
Prior to deregulation, utilities owned their power plants and delivered energy to customers at a regulated price. As part of the move to free markets, regulators capped electric rates for several years and required utilities to transfer or sell their plants.
The generation companies have been under contract with the distribution companies to provide power until the first of 2007, when the rate freeze expires. Rates after the first of the year were set by this reverse auction we have heard so much about. The distribution companies are now under contract to purchase electricity at this rate. Extending the rate freeze on the distribution companies will force them to charge less than what they have to pay. This would be a disaster waiting to happen.
While Ameren as a whole has been profitable, it is broken up into several subsidiaries that must act as separate companies. A profitable subsidiary cannot bail out a losing one. Doing so would be unfair to shareholders of the profitable company who did not invest in the other.
While we write our checks to Ameren, the generation companies that took part in the reverse auction are not known, or at least very hard to find. As the end consumer, we do not know where our product is originating. And it is these generating companies that are actually setting the price.
Maybe it is the State to blame for the impending rate increase. Twenty-three states passed electricity deregulation in the mid 1990’s. The California energy crisis of 2000 and 2001, and the Northeastern blackout in August of 2003, has left some states nervous. Since then, six states have either delayed or suspended the restructuring.
Illinois deregulation won’t allow distribution companies to produce their own electricity. The legislature has kept prices artificially low for close to a decade. They have set so many regulations to deregulation it is hard to regulate. Either repeal deregulation like many other states have or get out of the way of free market.
One company would own the distribution system and others would own the generation system or power plants. The distribution companies would contract rates from the generation companies and pass those to the consumer. The consumer would then have the choice to accept that package or shop elsewhere for a different supplier and pay separate bills to the supplying company and the distribution company.
Prior to deregulation, utilities owned their power plants and delivered energy to customers at a regulated price. As part of the move to free markets, regulators capped electric rates for several years and required utilities to transfer or sell their plants.
The generation companies have been under contract with the distribution companies to provide power until the first of 2007, when the rate freeze expires. Rates after the first of the year were set by this reverse auction we have heard so much about. The distribution companies are now under contract to purchase electricity at this rate. Extending the rate freeze on the distribution companies will force them to charge less than what they have to pay. This would be a disaster waiting to happen.
While Ameren as a whole has been profitable, it is broken up into several subsidiaries that must act as separate companies. A profitable subsidiary cannot bail out a losing one. Doing so would be unfair to shareholders of the profitable company who did not invest in the other.
While we write our checks to Ameren, the generation companies that took part in the reverse auction are not known, or at least very hard to find. As the end consumer, we do not know where our product is originating. And it is these generating companies that are actually setting the price.
Maybe it is the State to blame for the impending rate increase. Twenty-three states passed electricity deregulation in the mid 1990’s. The California energy crisis of 2000 and 2001, and the Northeastern blackout in August of 2003, has left some states nervous. Since then, six states have either delayed or suspended the restructuring.
Illinois deregulation won’t allow distribution companies to produce their own electricity. The legislature has kept prices artificially low for close to a decade. They have set so many regulations to deregulation it is hard to regulate. Either repeal deregulation like many other states have or get out of the way of free market.
