Planning for the Unknown: Filings for utility rate hikes could affect infrastructure improvements

By Susan DeGrane | Jun 14, 2024
connection between grid elements
It could happen anywhere—state commerce commissions holding the line on utility rate increases could cause months-long work stoppages. 




It could happen anywhere—state commerce commissions holding the line on utility rate increases could cause months-long work stoppages. These and other challenges are emerging as utility companies are pushed to modernize the grid and bring about the transition to renewable energy.

In December 2023, rate increases proposed by the two largest electric utilities in Illinois, ComEd and Ameren, caused the Illinois Commerce Commission (ICC) to reject the utilities’ multiyear integrated grid plans proposed for 2024–2027.

“As a result of the rejected grid plans, the utilities cannot immediately move forward with various grid investments proposed, and therefore, they were necessarily removed from the rate plans,” according to an ICC news release.

Ripple effects

Not long after, Intren, Union, Ill., had to lay off personnel. 

“This was a shocker! We started laying people off in January and more heavily in February,” said Matthew Turk, Intren’s chief operating officer. 

The company does contract work for ComEd in the Chicago metropolitan area and Ameren, which serves the lower two-thirds of the state.

Intren, which normally employs around 1,900 workers in 14 states, ended up sending 350 journeymen and field personnel back to IBEW locals in Illinois to find work in other states. Intren’s back-office operations let an additional 40 people go. 

Ameren and ComEd revised and resubmitted grid plans in March 2024. But the ICC had months to render a decision.

“It could take the ICC until December 2024 to make a ruling, which will mean we can’t get back on track with work until the spring of 2025,” Turk said. “I respect that the public service commission wants to keep rates low for consumers. But at the end of the day, somehow, we have to put money into preparing the grid.”

In downstate Illinois, additional revenue was requested to replace aging infrastructure and install distribution automation. The grid must also be equipped to bring renewable power generation sources online as coal-powered facilities are retiring. In deregulated Illinois, power is procured for Ameren and ComEd customers by the Illinois Power Agency. 

“We need to install connections for distributing energy and for interconnections for EVs,” Turk said. “We used to be a system of one-way power flow, but now many homes and businesses are selling power back to the grid with bidirectional flow needed for their solar arrays.”

In January, J.F. Electric Inc., Edwardsville, Ill., a contractor with a 20-year relationship with Ameren, laid off 110 journeymen and 10 office personnel. 

“Without the revenue from Ameren Illinois and other Illinois utilities this year, we are going to have to find other ways to cut expenses and overhead costs to keep our business running,” said Jonathan Fowler, president of J.F. Electric. “Payments on equipment and equipment rentals continue. With such a short notice, it’s been difficult.”

Other contractors and locals were also affected. 

“Between six locals, we’ve lost 1,600 jobs already,” said Bill Niesman, business manager for IBEW 9, Tinley Park, Ill. Joined by other locals and contractors, he wrote and signed a letter urging the ICC to consider job losses related to the rejection of ComEd’s grid plan.

Though Illinois stood out from other states in terms of contractor layoffs, ComEd and Ameren were not alone in requesting rate increases.

More funding requests

U.S. investor-owned electric utilities collectively requested $13.51 billion for rate increases for 2024. Those rate filings hit record highs for the third year in a row, according to a report published in March 2024 by S&P Global Market Intelligence, a financial information resource for regulators, utilities and investors reflecting capital expenditures. 

The report also said the utilities insisted higher rates are needed to cover costs to upgrade transmission and distribution systems and to install new technologies supporting the transition to renewable energy.

A National Renewable Energy Laboratory (NREL) study commissioned by the U.S. Department of Energy (DOE) and published in 2022 seemed to justify the utilities’ capital funding requests. 

Key takeaways from the NREL report suggest that to achieve 100% clean electricity generation goals set by the DOE for 2035, utilities will need to dramatically accelerate electrification and increase efficiency, rapidly install new energy infrastructure throughout the country and continue deployment of emerging technologies. 

In 2021, Illinois passed the Climate and Equitable Jobs Act (CEJA), which phases out utility-related carbon emissions by 2045. The CEJA decarbonization timeline is 10 years longer than the DOE’s, but both deadlines present tremendous challenges for electric and gas utilities.

Attempting to make headway, Ameren and ComEd’s 2024–2027 grid plans suggested an increase for electrical service of around $8 per month for the typical consumer. 

The ICC ruled that both utilities failed to incorporate customer affordability into their plans and that they did not outline how 40% of their plan benefits would be directed to low-income and environmental justice communities, as required by CEJA law. 

State variances

However, utilities in other states filed for notable rate increases and were able to keep working on infrastructure improvements.

For 2024, Southern California Edison increased its residential rate by 6.81%, or around $9.38 per month, to cover systems upgrades, wildfire mitigation efforts, infrastructure replacement and improvements to cybersecurity.

Prior to 2024, Georgia Power obtained cumulative rate hikes that raised the average residential customer’s bill by $38, according to the Atlanta Journal-Constitution. More recently, however, the utility was criticized as being too aggressive with its timeline for addressing a predicted capacity shortfall. 

That shortfall relates to growing numbers of data centers and EV charging stations. The new arrivals are causing demand for electricity in Georgia and elsewhere to spiral upward as electricity supplies remain constrained with renewables being slower to come online.

One factor that drives investment for maintaining and improving electric utility infrastructure is return on equity (ROE). State commerce commissions assign ROE percentages that tell investors what rate of return they can expect on their investments.

Illinois utilities received some of the lowest ROEs in the country. Last December, the ICC assigned ROE for Ameren of 8.72% and 8.905% for ComEd. In other states, utilities operate with ROEs of around 9.5% to as high as 11.5%. 

What could come next?

“Investors won’t put money into our utilities if the ROE in other states is so much better,” Turk said. “We aren’t asking for anything that other states aren’t asking for. The bigger picture is that this is stopping modernization of the grid.”

Intren has contracts with utilities in California, Indiana, Iowa, Maryland, Minnesota, Missouri, Ohio, Pennsylvania, Washington, D.C., and Wisconsin. It also handles storm restoration work in Louisiana, Florida and Texas. 

“We have to challenge this if we are to move on to clean energy,” Turk said. 

This situation also challenged Illinois JATCs struggling to build back enrollments after the pandemic. 

“We don’t have enough work for fully trained journeymen, much less for new people coming in,” Niesman said. “When the work finally does come in, we may not have enough trained personnel.” 

Several years prior to implementation of CEJA legislation, Illinois had made significant progress modernizing and hardening the grid, according to Fowler.

“Together with Ameren, we had made significant upgrades to the electrical system,” he said. 

Fowler represents the fifth-generation in the family-owned company that normally operates with 1,200 employees in several Midwestern states, including Illinois, Kansas, Missouri and Ohio and storm response nationwide. After the rejection of Ameren’s grid plan, J.F. Electric operated with around 800 employees.

J.F. Electric’s previous infrastructure renewal and hardening efforts, combined with those of other line contractors in Illinois, had helped Ameren customers avoid 6.5 million outages, saving more than $2 billion in outage-related costs.

The new CEJA legislation, however, allowed Ameren and ComEd to switch from formulaic plans to multiyear grid plans. Though not uncommon, multiyear grid plans may have a downside. 

“We went from a process of certainty working with budgets to where there’s no clear certainty at all,” said Matt Tomc, vice president of regulatory policy and energy supply for Ameren Illinois Co., a subsidiary of Ameren Corp.

Work for Ameren in Illinois accounted for about 25% of J.F. Electric’s business. Fowler anticipates his company will survive, but he shares a looming concern with Tomc about falling behind with modernizing and improving grid reliability.

“We work in five or more states at any given time, and we are seeing solar, wind and other renewable energy projects much more frequently than in Illinois,” Fowler said. 

“It’s going to cost more money to get more done more quickly,” Fowler said. “We’re going to be condensing the work schedule to get more done and it will be challenging to coordinate so many people working together. One of our executive VPs in the industry for 33 years said he’d never seen anything like it.”

About The Author

DeGrane is a Chicago-based freelance writer. She has covered electrical contracting, renewable energy, senior living and other industries with articles published in the Chicago Tribune, New York Times and trade publications. Reach her at [email protected].





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