ComEd offers Illinois $500M in exchange for guaranteed profits
The gaul of this is hard to put to words. Commonwealth Edison, one of Illinois’ regulated utilities is seeking to take advantage of the state’s budget crisis by offering the state $500 million in exchange for a guarantee of the utility’s future profits. If there’s a better case to be made that a regulated utility isn’t a business in any normal sense of the word, I haven’t found it.
As a regulated monopoly, ComEd doesn’t get exposed to much in the way of competition, and as long as they can get regulators to declare that their capital investments are prudent, they get guaranteed cost recovery on those investments. That said, there is the possibility they could lose some money if they don’t manage their operating costs, and I suppose it’s always possible that further deregulation might erode profit margins. Possible, but far from guaranteed. After all, they are, at present, sitting on at least $500 million more cash than they need. Normal businesses might consider that an opportunity for re-investment, dividends to shareholders, price cutting or even bequests to charities. Not so ComEd, who seems to be hoping to use a bit of patronage to lock in profits and eliminate what little incentive they presently have for cost-control.
Let’s hope the Illinois legislature does the right thing.