"The story from hell," one reporter called the Commonwealth Edison franchise hearings before the City Council's Committee on Energy, Environmental Protection, and Public Utilities, which were held Monday and Tuesday, June 17 and 18. He was right. The negotiation of the city's biggest contract refuses to fit into a sound bite. Worse yet, the stock story lines have become confused, with the often-arrogant utility claiming that it originally opposed the consumer service charge (a flat-rate fee that accrues even if you use no electricity), with some consumer groups staging their own bit of arrogant theater by walking out of the proceedings late Tuesday afternoon, and with the powerful Daley administration strangely uneasy about letting the public in on the process.
In less than 180 days, Edison's right to sell electricity in Chicago (last renegotiated and renewed in 1948) expires. The franchise issue is finally attracting the attention of diligent reporters: James Ylisela Jr. and Lisa Capitanini in the June Chicago Reporter valiantly investigated Edison's reliability, and Dale Eastman in The Neighborhood Works (April-May and June-July) documented the company's policies of subsidizing electricity use in downtown buildings and obstructing cogeneration measures.
Unfortunately, coverage by larger media has focused on who's been acting toughest, not on the substance of what the energy committee's chairman Edwin Eisendrath calls "the most difficult topic the City Council has to deal with." Here are some background points to help make sense of the sound and fury just past and still to come.
The wimp factor. On the morning of the first day of the June hearings, chief city negotiator Robert Helman--a veteran gas-company lawyer with Mayer, Brown & Platt who is serving without charge--spoke softly, smiled a lot, and was reticent about some city negotiating positions. That afternoon, chief Edison negotiator and former federal judge Susan Getzendanner talked tough. Asked if the utility takes seriously the possibility of a city takeover, she snapped, "You couldn't afford it."
The city's apparent lack of starch worried some of the aldermen and consumer advocates present. "The city played softball and Edison played hardball," warned Maureen Dolan, director of the Chicago Energy Options Campaign. "The city cannot afford to 'wimp out.'" Alderman Ed Smith asserted, "You've got to deal with big business like you were dealing with the Marquis de Sade: They come in with a knife and a razor--you've got to come in with a machine gun."
There are reasons, of sorts, why various people expect the Daley administration to cave in to Commonwealth Edison. In 1987, State's Attorney Daley (along with Governor James Thompson and Attorney General Neil Hartigan) endorsed Edison's dubious "rate freeze" scheme over the howls of consumer advocates and Mayor Harold Washington. Now Daley's quiet strategy as mayor has kept the franchise issue largely out of public view. The corporate culture of Edison seems more compatible with the Daley City Hall than it did with the independents and reformers who surrounded Washington. And the media have been hard pressed to find anything to say about an administration that holds its decisions closely and enjoys a mandate at the polls and a supermajority in the City Council.
So it's understandable that the media and others made a big thing of the machismo contest between Helman and Getzendanner. But it's misleading. Daley has not been a wimp on this issue (his denying that he's a wimp doesn't make him one). The city's negotiating position with Edison has been tough and consistent all along: a new franchise should include bill reduction for small users of electricity, enforceable energy-efficiency measures by the utility, plus improvements in reliability, environmental, and equal-opportunity programs. If no satisfactory agreement can be reached, the city stands ready to buy the company out as provided for in the 1948 franchise.
As far as one can tell without eavesdropping on the negotiations themselves, Helman hasn't backed down on these points. Alderman Eisendrath correctly discounts the machismo derby. "People here are used to seeing toughness expressed by anger, by tipping the table. [Helman] has proved himself in his professional career to be extremely effective."
Since the hearings, Daley and Helman have tried to sound tougher, while Getzendanner and Com Ed vice president Donald Petkus (who testified along with her) have tried to sound nicer. The city administration has taken steps toward increased city inspections of Edison facilities, a previously taboo subject--though the steps are very small. The ordinance passed by the council June 28 specifically exempts all "apparatus, conductors or equipment installed for or by public utilities."
So perhaps in the Machiavellian world of high-stakes negotiations, it may be good strategy for consumer groups and aldermen to berate Helman so he can tell Getzendanner he has to get something more--if only to satisfy the mayor's raging constituents.
The reliability factor. If it hadn't been for the west-side blackouts last summer (originally precipitated by a fire outside the Crawford station), the new Com Ed franchise would long since have been signed, sealed, and delivered. The outages and subsequent uproar led Daley and Edison to agree to a one-year extension of the franchise (which otherwise would have expired December 31, 1990). Negotiations were suspended throughout last fall and winter while various consultants investigated whether Edison will indeed be there when we need it. The city hired William Snowden of Failure Analysis Associates, Inc., to look at the reliability of Edison service in Chicago, and he presented his results in public for the first time before the committee on Tuesday, June 18.
He didn't find what some consumer advocates expected--either a general lack of maintenance or gross neighborhood-to-neighborhood disparities in maintenance. He described the utility's transmission system as highly reliable and its distribution system as comparable to that in other big cities. But the details of his picture, expressed in language so cautious as to be academic, are less reassuring than these general conclusions.
In Snowden's opinion--carefully couched as recommendations, not criticisms, in his draft report--Com Ed is not upgrading the voltage capacity in its distribution system fast enough; it's moving too slowly toward an automated distribution system that would allow it to find and fix outages promptly; and five of its key downtown substations depend on a single distribution point that should have more inspections, more maintenance, and better security. Under questioning from Eisendrath, Snowden acknowledged "significant differences between what we find in newer [distribution] facilities . . . and older facilities, like LaSalle and Dearborn substations, with respect to fire protection. For example, all the newer facilities . . . contained smoke and heat detectors." He added, with a sarcasm that seemed to elude his audience, "You don't find such simple and inexpensive devices in some of the older facilities." Eisendrath concluded later, "The report shows that Edison has not been aggressive in these investments."
The city had asked Snowden to study overall reliability, not to find the cause of the fire outside the Crawford generating station that led to the outages--the state Commerce Commission hired its own consultant to investigate that event. Snowden had expected to know the consultant's findings: "We were originally promised a copy of that report at its completion on April 1, then May 1, then June 1." (It's now slated for release July 19.) Yet even though he didn't know the cause of the 1990 outages, he described them as "singular, significant interruptions" unlikely to be repeated. And even more intriguingly, he acknowledged under questioning that "the configuration that now exists in the bowels of the Crawford station is . . . significantly superior to what existed there prior to the fire. In particular, control and power cables are isolated in steel conduit which provides much, much greater protection against a significant outage."
This is a roundabout way of saying that Crawford could have been much, much safer than it was last summer. Curiously enough, city consultant Maurice Gamze had reported a low level of maintenance within the plant more than a year ago. On May 18, 1990--according to a hitherto confidential tape transcript--Gamze told the Mayor's Electricity Working Group that "the electrical facilities at these plants [Crawford and Fisk] are very shoddy. I hate to say it, but the electrical switch here is not in good order. We were very shocked by the condition of the switchboards. It looks like the plant has been programmed for decommissioning in the near future, because we can see that there has been no great effort to maintain it. There are a number of failed boards, and instead of fixing them they bypass them. They have temporary cables, temporary boards. It's just not normal power plant operations." His point: in case of a buyout, the city should get Crawford cheap. Com Ed spokesperson John Hogan strongly denies Gamze's assertions: "There is no plan to decommission Crawford station. It's an integral part of our system, and it's well run and well maintained even though it is 65 years old."
The expense factor. Edison is unpopular, and the franchise question is interesting, largely because the utility's rates and bills are so high. But at first glance, the city can't do much about them. Under Illinois law, unless a city owns its utility, the state Commerce Commission sets the utility's rates (after proceedings in which cities can and do intervene). A new franchise could not legally contain a provision requiring Edison to lower its customer service charge or to quit charging large users less per kilowatt-hour. Both Helman and Getzendanner paid homage to this reality when they told the committee that rates could not be part of the deal.
But there can be more to a bargain than what appears in the final agreement. For example, Edison has asked the Commerce Commission to reduce its monthly customer service charge from $10.63 to $9.48 for home owners, and from $5.33 to $3.99 for apartment dwellers. The city takes credit for the move. It's "an achievement that we're proud of," said Helman, although he'd like to do better. Getzendanner described it as a goodwill gesture. Evidently , more such trade-offs are possible--as long as they aren't written into the franchise itself.
The franchise-fee skirmish. Getzendanner told the energy committee that the franchise fee Edison pays the city--about $70 million a year--is the "highest by many millions" of any electric utility in the country (adding that the company would like to negotiate a lower one, or none at all). This is true as far as it goes--after all, Edison is one of the two or three biggest all-electric utilities in the U.S., so it's hardly a surprise that it should pay more than most. But when Getzendanner tried to slide from this point to claiming that the city's 4 percent franchise fee rate was also out of line, Eisendrath was ready for her. He handed over a list of other cities' franchise-fee rates: Houston 4 percent, Saint Louis 4, Miami 6, Tampa 4.6, Las Vegas 4.67, Saint Petersburg, Florida, 6, and so on.
At center stage--energy efficiency. One of the best ways to bring customer bills down--and reliability aside, the most important issue in the franchise talks--is energy efficiency. Conservation is also a way for Com Ed to postpone having to build expensive power plants like the nuclear family that forced its rates up so drastically in the last decade.
The idea is paradoxical but simple--and widely practiced by other utilities: it's cheaper for Edison to subsidize (or give away) energy-saving light bulbs, weatherization kits, even efficient appliances, than it is for the utility to build new power plants to generate electricity to run inefficient light bulbs (such as the ones it currently distributes), heat poorly insulated buildings, or run leaky refrigerators. Comparable conservation and "demand-side management" programs can be instituted for business and industry, and large institutions can be encouraged to "cogenerate" their own heat and electricity.
In its May 1990 report to the city, Komanoff Energy Associates concluded that efficiency measures were more important than ownership: "By the year 2009, pursuing efficiency opportunities aggressively and comprehensively, rather than letting the market determine the rate of conservation investments, could lead to 15 to 20 percent smaller electric bills for Chicago homes and businesses." (That's smaller than they would be otherwise, not smaller than today.) Better yet, "investments to improve end-use efficiency can be pursued equally by Edison or a City-owned utility. Although Edison has undertaken little such investment to date, the franchise renewal process may provide the City with sufficient leverage to induce Edison to re-orient its priorities toward a "demand-side' investment strategy. This outcome could confer upon Chicago the economic benefits of improved end-use efficiency without subjecting the City to the financial risks and institutional effort entailed in creating a municipal electric utility."
However, having years ago committed itself to a gargantuan power-plant-building program, Edison has shown little interest in reducing demand. At the hearings Helman displayed a dramatic bar graph showing just how little interest: for instance, in 1991 Wisconsin Electric Power budgeted $68.08 per customer on energy-efficiency programs, while Edison planned to spend just 25 cents.
Com Ed vice president Donald Petkus disparaged this point, saying aggressively conserving utilities have to conserve. "Wisconsin Power is currently in a very short capacity situation . . . . They are taking a gamble. . . . We have chosen to make sure that we have adequate capacity." But one utility executive's "gamble" is apparently another's "outstanding success." That's how the trade association Edison Electric Institute described Wisconsin Electric's programs--including its demand-reducing appliance turn-in program--when it gave the utility the 1990 Edison Award on June 5, 1991.
(Not) getting the word out. To date the Daley administration's negotiating stance with Edison has been good for consumers in almost every particular except public relations and information. That may seem like a trivial exception, but a well-informed and supportive public would at the very least give the mayor a more credible acquisition threat with which to negotiate. And it might have saved him from the "wimp" accusations he is now trying to dispel.
Despite repeated invitations, no one from the mayor's administration attended the Chicago Electric Options Campaign's April 27 energy options conference (Eisendrath and County Clerk David Orr showed up). The reasons for this characteristic reticence are unclear. Robert B. Wilcox, who cochaired the Mayor's Energy Task Force of 1989, told the April 27 gathering, "Some of us are becoming a bit schizophrenic, seeing on the one hand that the mayor seems to be pursuing the Edison negotiations in sound directions and seeing on the other hand that the public's confidence in the city's negotiating activities are undermined by an excessive secrecy and unwillingness to participate in appropriate public forums."
Typical of the administration's fumbling touch was William Snowden's appearance at the Tuesday-afternoon hearing, when he read complex, jargon-laden testimony at top speed in a gravelly monotone. Aldermanic protests finally led to a half-hour interruption, during which staffers scrambled to photocopy the engineer's handwritten notes for committee members to follow. Even the normally mild Eisendrath described the snafu as a "waste of all our time" and "incredibly uncalled-for"; he suggested to Snowden that he relay committee dissatisfaction "to your handlers in the administration."
The hearing schedule that Eisendrath set up was hardly ideal. It allowed Edison's representatives to speak after the city's, which allowed Edison to tailor its response to the city's statements. Getzendanner made good use of this when Alderman Percy Giles complained that her responses were "very shallow": "I would want to discuss everything to the ultimate detail, if Mr. Helman had," she said. "But I don't think you can expect more from me than you got from Mr. Helman." Worse, the committee schedule relegated all public input to the end of the second day, causing some groups--notably the Chicago Electric Options Campaign and Greenpeace--to storm out without testifying. Other business and public-interest groups stayed around to testify in a session that ran two hours overtime.
During the hearings, council members of a variety of political persuasions--Joe Moore, John Buchanan, Bobby Rush, Robert Shaw--were critical of the city's position. Buchanan worried that Helman would bring a take-it-or-leave-it franchise back to the council: "Don't you think it's about time that these guys in this council get just a bit more information as to what's going on? [Couldn't] a couple of these guys sit in as partners in this agreement? We did it with the war in Iraq. You know, we let some congressmen and some senators sit in on the war plans and nobody went out on the street and talked about it." Later Rush said in frustration, "We [are] caught . . . betwixt and between. Mr. Helman this morning said, 'Wait until this afternoon. Ask Commonwealth Edison.' Commonwealth Edison said, 'Wait until the next hearing and ask Mr. Helman.' . . . This has been totally evasive, nonproductive--absolutely a waste of time today."
It doesn't seem likely that administration relations with the council and consumer groups could deteriorate to the point where the City Council might reject a franchise agreement recommended by the mayor. But as Com Ed and Michael Bilandic can tell you, even a single error can have drastic repercussions.
Art accompanying story in printed newspaper (not available in this archive): illustration/Kurt Mitchell.