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Chicago Officials Looking Into Actual Cost Of Cutting Out ComEd

WBEZ

Tuesday, March 10, 2020  |  Article  |  Becky Vevea

Chicago Mayor (16) , Chicago (16) , ComEd (94) , Utilities (94)

The City of Chicago is now looking into exactly what it would cost to run its own electric utility and break ties with Commonwealth Edison, as some activists and socialist aldermen have been urging.

Last October, the city’s law department quietly signed a $120,000 contract with NewGen Strategies and Solutions, LLC to study the feasibility of something known as municipalization. That would basically involve City Hall buying up all of ComEd’s equipment and infrastructure, making some ComEd employees city workers and turning ComEd’s operation into a public agency.

The scope of services the city is exploring, obtained by WBEZ and being released Tuesday, outlines what numbers the city wants crunched before determining whether they want to cut ties with ComEd. It comes as Mayor Lori Lightfoot’s administration is also in negotiations with ComEd over another franchise agreement with the city.

“It’s just an important part of due diligence for a discussion of this magnitude,” said David Reynolds, commissioner of the city’s Department of Assets, Information and Services.

“One of the fundamental questions that we want answered is: Could this city provide the same level of service – the reliable, safe, cost-effective service – at a price that is equal to or better than what ComEd is doing now?” Reynolds said.

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NewGen is tasked with calculating a total purchase price, in addition to calculating separation costs, start-up costs, financing and other risks and benefits.

Reynolds said the cost estimate will have to take into account how to untangle the city of Chicago from all of ComEd’s other customers.

“Imagine taking a set of scissors and cutting around Chicago’s border,” Reynolds said of separation. For example, Boulder, Colo. has been trying to take over their electric service for a decade, but it’s led to a lengthy legal process to buy back the poles, wires, and other assets in Boulder from Xcel Energy, which operates throughout Colorado.

Talk of a city takeover of ComEd comes as the electric utility faces scrutiny over its Springfield lobbying practices. A broad federal criminal investigation into ComEd and its parent, Exelon, has prompted Lightfoot to say she’ll push for more information about the scandal before entering into a new contract with ComEd.

Earlier this month, a ComEd spokeswoman told WBEZ it would cost the city upwards of $10 billion to buy the company’s infrastructure in Chicago. The number led Mayor Lori Lightfoot to dismiss a city takeover of ComEd the very next day.

The activists who are behind the push to remove ComEd from Chicago’s energy picture dispute the company’s math and have done their own calculations using publicly available documents.

“If that $10 billion number was true, that would mean 45 percent of ComEd's total assets were located in only 2 percent of their service territory,” said Matthew Cason, co-chair of the Democratize ComEd campaign, which is pushing for municipalization. “We'd look up and there’d just be wires everywhere. It'd be a very unattractive place to live.”

Cason pegs the number closer to $5 billion, which is also the number a ComEd official said during an interview on WTTW last July.

ComEd Spokeswoman Jean Medina said the company has not done “a true cost analysis for this kind of complex transaction” but reiterated that the number would “approach $10 billion.”

Medina said their calculation assumes the city would have to purchase ComEd’s physical assets within city limits, which on paper are worth roughly $7.6 billion. It also includes the city paying separation costs to break away from what is now an integrated system, which be up to $2 billion, and take on other start-up costs associated with providing energy to residents.

“Maintaining that level of performance requires sustained investment of time, money and the hard work of thousands of very experienced employees,” Medina said. “The significance of the undertaking is hard to overstate.”

The city’s contract with NewGen asks them to model what expenses and revenues would look like over a 20-year period under a city-run utility compared to ComEd. It also asks them to estimate how much rates would be under each scenario.