Illinois Lawmakers Stand Up for Consumers by Rejecting Anti-Competition Proposal

Illinois state lawmakers protected the state’s electricity consumers this week by rejecting legislation that would have subsidized construction of a $3.5 billion power plant.
 
Had it passed, the Taylorville Energy Center (TEC) subsidy bill would have threatened jobs by dramatically increasing consumer prices. TEC sponsors had proposed subsidizing the plant’s construction by requiring electric distribution companies to buy power from the plant for 30 years at above-market prices. These distribution customers would then have had to pass this additional cost along to their customers.
 
By subsidizing the TEC power plant’s expensive and unneeded electricity, both residential and commercial and industrial (C&I) customers would have been harmed.
 
While residential and small business consumers would have their increases capped, the bill’s negative effects would have been much more dramatic for large electricity consumers. These job-producing businesses would not have had a cap on rate hikes, and could have seen skyrocketing rate increases to cover construction overruns or any additional costs. For these customers, the increased costs would have jeopardized thousands of jobs.
 
In its cost analysis, the Illinois Commerce Commission raised concerns about these potential hikes, saying “the Commission concludes that the TEC facility features high costs to ratepayers with uncertain future benefits, and uncertainties that potentially add to already significant costs.”
 
Illinois lawmakers wisely recognized the risks to consumers outweighed the potential benefits of subsidizing the plant. Competition, beyond empowering retail consumers to shop to obtain the lowest-cost energy, sends signals to investors when new power plants are needed, and those investors then bear the financial risk of project failures or cost overruns – not ratepayers.
 
The Illinois state legislature’s decision holds lessons for other states considering subsidizing power plant construction in an effort to promote short-term jobs at the risk of long-term economic growth and consumer rate hikes. New Jersey Governor Chris Christie is currently considering signing a bill that would do just that in his state. A Christie veto can send a strong signal of support for New Jersey consumers and long-term economic health.
 
COMPETE supports competitive electricity markets because they provide tangible economic and environmental benefits for consumers. Proposals like the bills in Illinois and New Jersey threaten all of these consumer benefits and take a dangerous step backward toward the days of monopoly-protected utilities which needlessly imposed high costs on consumers.

Joel Malina | January 13, 2011