AARP Illinois disappointed with Senate electrical vote; Senate okays artificially inflated residential electric rates

SPRINGFIELD, Ill., Nov. 30 /U.S. Newswire/ -- AARP Illinois opposes the ComEd compromise bill that was recently passed by the Illinois State Senate. Under the bill, residential customers would be faced with paying artificially inflated electric rates generated by the auction.

"AARP has warned policymakers for the past two years that the utilities auction proposal would generate artificially inflated rates. In September, our predictions were proven true," said John Reinhart, AARP Illinois state director (interim).

"We have seen a lot of smoke and mirrors from proponents of the auction. The basic truth is that utilities, in a monopoly situation, should expect to have their costs reimbursed with a reasonable profit. Anything else is not a compromise and is unpalatable to the residents of the State of Illinois."

AARP's position on this issue has remained consistent -- that state oversight must continue in the setting of residential electric rates. In an open letter to the General Assembly (see below), Donna Ginther, manager, State Affairs, clarified AARP's involvement on the issue and maintained that residential rates should be based on the actual cost of providing electricity and provide for a reasonable rate of profit. The utilities have rejected this system in various ways, including pushing for the use of an auction to generate artificial rates. The proposal supported by AARP to extend the electric rate freeze was an opportunity for the utilities to determine how to continue to provide reasonable and just electric rates while maintaining a reasonable profit.

"The electric companies have been racking up record profits over the nine years the electric freeze has been in effect," said Nancy Funk, AARP State Legislative Committee. "Now they cry bankruptcy and residential customers are expected to pay artificially inflated prices to bail them out. When Illinois families can't pay their bills, who will bail us out?"

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Open Letter to the General Assembly

November 29, 2006

Dear Legislator:

re: Residential Electricity Rates

AARP wishes to thank those legislators who have stood with residential customers in their quest for affordable electricity.

During the debate yesterday evening in the House of Representatives, two defenses of the proposed rates hikes were put forward.

Twinkie Defense: The argument was made that if the price of a soda and a Twinkie doubled, you couldn't simply ask the grocer to absorb the increase. Actually if you couldn't afford the name brand snack, you could buy a generic snack. The fallacy of this defense is if you can not afford name brand electricity, residential customers can not purchase generic electricity to satisfy their craving for heating, cooling and lighting.

Industry Bailout Defense: Electrical companies have been able to rack up record profits over the 9 years the electrical freeze has been in effect. Now they cry bankruptcy and residential customers are expected to pay artificially inflated prices to bail them out. When Illinois families can't pay their bills, who will bail us out?

Setting the Record Straight:

-- AARP did not wait until the 11th hour to speak out.

-- AARP has consistently warned policymakers that the reverse auction would result in artificially inflated residential prices.

-- AARP has offered two proposals to ensure that residential electricity rates remain affordable in Illinois, while permitting incumbent utilities a reasonable rate of return.

-- AARP was not at the table during the spring or fall negotiations in 1997, which were by invitation only. We were neither invited nor permitted to attend.

-- AARP opposed deregulation, stalling action on the proposal until the automatic deregulation of residential customers was removed from the proposal

-- AARP documents filed with the legislature in 1997 consistently indicated that residential customers wanted real rate relief, protection for the future, and access to affordable electricity. These goals are as relevant today as they were in 1997.

Donna Ginther

Director of State Affairs