With proposed $1.5 Billion rate hike, double-digit profit rates, ComEd could ‘make out like bandits’

In a Tuesday morning U.S. Securities and Exchange Commission (SEC) filing, ComEd’s parent company Exelon indicated that later Tuesday, ComEd would propose a $1.5 billion rate hike. The proposal would go into effect for the years 2024-2027 through a “multi-year rate plan” as established by Illinois’ Climate and Equitable Jobs Act. Much of the proposed increase in what customers will pay is for a spike in ComEd profits, exactly as Illinois PIRG warned when the law was debated and passed. 

Under the previous “formula rate” rate-making regime, passed as part of ComEd’s bribery scheme, ComEd’s profit rate, known as the Return on Equity (ROE), was set by a formula tied to interest rates. Because interest rates were low over much of the period, ComEd’s ROE remained relatively low. For example, the 2023 ROE is 7.85%. In Tuesday’s filing, ComEd is requesting a 10.5% ROE in 2024, which would grow to 10.65% by 2027. The new multi-year rate setting process allows for this potential increase in ComEd’s profit rate, while maintaining the “profit guarantee” of the old formula rate process, making the new process potentially much more profitable for ComEd.

The majority of the rate hike would occur in 2024, when ComEd proposes an $847 million  increase. That single year rate hike is more than the $827 million rates went up total over the 11 years from 2012-2023 under formula rates. In its SEC filing, ComEd indicated that the 2024 increase would be even higher had it not shifted some of its proposed increase to 2026.

If ComEd’s proposal is approved, ComEd will have doubled the rates it charges customers between the beginning of the formula rate era in 2012 and 2025. By 2027, ComEd rates will have gone up by 123%

In response to today’s ComEd rate filing, Illinois PIRG Director Abe Scarr made the following statement:

“With its proposed $1.5 billion rate hike, ComEd has the opportunity to ‘make out like bandits.’ It’s crazy that ComEd has emerged from its bribery scandal in position to raise rates more and make higher profits than it ever did under the ‘formula rates’ it won through its scheme.

“ComEd will no doubt justify its massive proposed rate hike by the need to invest in the grid to transition to clean energy. But as vital as the clean energy transition is, it cannot mean a blank check for ComEd to raise rates and fatten Exelon’s profits.

“The formula rate era taught us something important: ComEd was able to make unprecedented investments in its grid with relatively low profit rates. That means ComEd does not need higher profit rates to attract the capital it needs to make massive grid investments. Utility regulators must keep that in mind when considering ComEd’s request for double-digit profit rates.”