News & Politics » Neighborhood News

The ten-year war: How consumers' groups beat Commonwealth Edison

by

comment

It's hard to feel too sorry for Commonwealth Edison, the $6 billion monopoly to which we have no choice but to pay our electricity bills each month.

And yet a twinge of empathy might have materialized at the sight of Edison chairman James O'Connor and other company honchos stiffly standing at a press conference with consumer activists in September to announce a grand settlement in a ten-year legal war of attrition: in exchange for a 6 percent rate reduction and a $1.34 billion refund to consumers, the consumer groups dropped their lawsuits against Edison.

Actually, it wasn't so much a settlement as utter capitulation by Edison, which lost despite outspending its opponents by millions of dollars. For years the consumer activists charged that Edison had unfairly passed on to users the unnecessarily high construction costs of several nuclear reactors. To this day Edison stubbornly denies those charges. But with the settlement the company at least tacitly acknowledges that no one--not even sympathetic state regulators--will ever fully believe it.

For consumers, the deal hits home with this month's electric bill, which for the average user will be about $23 lower than usual.

"I don't want to gloat," says Howard Learner, the public interest lawyer who oversaw much of the litigation against Edison. "But this was a big, big victory."

What makes this triumph particularly delicious is that no one foresaw it ten years ago. Edison has always been one of the area's better-respected corporations--its executives members of the business elite and participants in noble civic causes, including civil rights. These executives were on chummy terms with officials at the Illinois Commerce Commission, the state entity that regulates utility rates (indeed, the Sun-Times recently revealed that several ICC employees attended a White Sox playoff game with tickets provided by Edison). They had high-ranking friends in both parties and they got almost every rate hike they requested, mainly because it was assumed that Edison wouldn't ask for one if it wasn't needed.

However, this attitude began to change in 1983 with the legislative act that created the Citizens Utility Board, a statewide advocacy organization for consumers.

"The idea behind CUB was that we could no longer depend on utilities like Edison and the regulators to guard our interests," says Martin Cohen, CUB's acting executive director. "We were allowed to insert membership forms into utility bills, which was great for fund-raising. People would look at their utility bills, get mad, and sign up."

Within a few years, CUB's membership swelled to more than 100,000; CUB hired Susan Stewart as executive director and allied itself with Business and Professional People for the Public Interest, the public interest law firm Learner worked for. "The big issue was the nuclear reactors," says Learner. "In the early 80s Edison built five nuclear reactors. We challenged Edison for passing those costs on to users."

The legal challenges took place in hearing rooms of the ICC.

"One fundamental problem with the ICC is that it allowed Edison to charge consumers for cost overruns on the nuclear reactors," says Learner. "Time and time again Edison would tell the ICC that a plant would cost a certain amount and be completed by a certain date. They'd get their rate increase only to come back later and say it would be more expensive and take more time. And each time the ICC passed the cost on to users in the form of higher electric rates."

In 1985 the ICC granted Edison a rate hike that would pay for much of the construction. BPI, CUB, and other consumer groups appealed the ruling to the courts. "We won that appeal, thus setting a pattern," says Learner. "Edison would win before the ICC and we'd win on appeal. The courts don't have the authority to set rates--they can only kick the matter back to the ICC for a new hearing. This went on for years."

In the meantime Edison was working behind the scenes with then governor Jim Thompson, then attorney general Neil Hartigan, and then state's attorney Richard Daley to bring an end to the rate hike imbroglio. In December of 1986 these politicians and O'Connor announced a $3.3 billion rate hike--less than Edison said it really needed but enough to keep providing service at the usual high level. Thompson called it the "deal of the century."

"Edison was to receive its rate increase over the course of five years, and in return, well, there wasn't much of anything for consumers," says Learner. "Edison wanted us to support the deal and Thompson said it was the best deal we'd ever get. Mayor Washington, to his credit, was the only major politician to oppose it."

CUB, Learner, and the other activists denounced the proposal, and after several weeks of negotiations the so-called deal of the century fell apart. Edison went ahead anyway and sought ICC approval for the rate hike. To Learner's surprise, the ICC rejected the request by a vote of four to three.

By this time, the fight had clearly become more bitter and even a little personal. CUB, for instance, dug up state phone records and revealed that then ICC chairman Terrence Barnich had made about 200 phone calls to Edison over the course of several months. "There's nothing illegal about those phone calls, but it sure looked funny," says CUB'S Cohen. "I'll tell you what--Barnich never called us 200 times. When the press asked him about the calls, he said, 'Hey, these are some of my best friends.'"

For its part, Edison turned rate-hearing sessions into grueling wars of attrition. "The hearings would last day and night--from eight in the morning until two in the morning--six days a week," says Learner. "Edison called dozens of witnesses, most of whom repeated themselves. They had a battery of attorneys from the best law firms and they rotated them in and out of the hearing room. But we never had more than two or three attorneys, so we were there all day. It was an obvious attempt to wear us down."

Eventually the battle branched out onto other legal fronts. There was the membership form insert case, and the fuel adjustment case, and the interest rate case, and the tax assessment case--all of them lengthy affairs involving arcane legal issues.

"The utility companies forced us to stop membership inserts in bills by arguing that they violated their First Amendment rights," says Cohen. "That was a scary moment; we didn't know how we would survive. We had to convince legislators to let us use state of Illinois mailings. Then we had to win enough votes to overcome Thompson's veto."

The nuclear cost-overrun cases had bounced around the court system for almost eight years when, last January, the ICC ordered Edison to refund $600 million and make a $339 million rate cut.

It was a major turning point. Edison had been losing in the courts for years; now even the ICC had turned against them. Not long after the ICC ruling, Sam Skinner, Edison's newly hired president, invited Learner to breakfast at the Chicago Athletic Club, a private downtown club. "It was Skinner's choice--not mine," says Learner. "I'm not a member."

After that there were many other meetings, and gradually Edison gave in. The final tricky points of negotiations involved the press conference itself, an intricately choreographed event in which Learner, CUB'S Stewart, Edison's O'Connor, Mayor Daley, and Attorney General Roland Burris all got a chance to speak.

"For too long, these controversies have required too much of our company's resources," O'Connor said at the press conference.

The settlement, Edison officials maintain, should not be regarded as a reversal of past company policy. "We've always felt that we've done the right thing at all times--I don't think we have any regrets," says Sam Falcona, Edison's communication services manager. "Certain facts speak for themselves. On August 27 of this year, we hit a peak record of demand by our customers. It was the nuclear power that gave us the capability to provide power to our customers without interruption. You don't plan for peak days two months before--you start planning years before. That's what we were doing all those years --planning. And every employee should be proud--we pushed the envelope."

Under the terms of the settlement, Edison is allowed to apply for another rate hike at the end of the year--an option the company is considering. "Like any good company you're always exploring your options," says Falcona.

Cohen assumes Edison will seek a rate hike and that a new battle will erupt when it does, even though many players in the old fight have moved on to new jobs. Learner, for instance, left BPI to help form a new public interest firm--the Environmental Law and Policy Center of the Midwest. Stewart has stepped down to a consultant's role with CUB while becoming an advocate for bone marrow transplant patients. Cohen is expected to succeed her formally early next year.

"I can almost predict what will happen," says Cohen. "Edison will say that the settlement was then and this is now and we need a rate hike and here's why. Then we'll have to go through months of testimony and years of court cases and thousands of pages of hearings all over again."

Add a comment