Understanding your electric bill: A discussion with a ComEd expertJanuary 22, 2021
Do you know the factors that determine how much you pay for electricity?
Most people are familiar with their energy bill, but not everyone knows how their electric rates are set.
To help customers better understand, ComEd Director of Rates and Revenue Policy Susan Tracy explains how delivery service rates are established. Tracy has held several roles in 21 years at ComEd. In 2018, she joined the regulatory department, where she oversees ComEd’s ratemaking process.
ComEd Director of Rates and Revenue Policy Susan Tracy
with her 8-year-old golden retriever
What costs make up a customer’s electric bill?
Tracy: Before we dive in, it’s important for customers to understand that that their energy bill is made up of two primary costs: delivery service and electricity supply.
Delivery service is the delivery of the electricity to homes and businesses in northern Illinois. ComEd provides this service regardless of the choice of supplier. The delivery service rate covers the maintenance in ComEd’s distribution system. Beyond the upkeep of grid equipment like power lines, poles and substations, the service rate funds storm restoration and smart grid investments needed to help customers take advantage of advancing technologies.
Electricity supply is the electricity itself that comes through the electrical wires. Utilities charge customers for the costs of purchasing electric supply, without any mark-up or profit, based on how much electricity a customer uses monthly.
Customers in Illinois can buy electricity supply from more than 75 suppliers authorized by the Illinois Commerce Commission. For those customers that do not choose a competitive retail supplier, ComEd buys electricity in the competitive wholesale market through a process managed by the Illinois Power Agency. Energy supply charges account for almost half of the monthly residential bill.
How are delivery service rates established?
Tracy: As an Illinois utility, ComEd is a regulated company. Our rate is based on costs ComEd needs to recover that are deemed prudent and reasonable as well as a return on approved investments. ComEd has statutory guidelines on what costs and investments it can recover and earn. There’s a balance that comes into play to protect the customer while enabling ComEd to continue to provide safe, affordable and reliable electricity.
What is the role of the Illinois Commerce Commission?
Tracy: ComEd’s delivery service rates are regulated and set by the Illinois Commerce Commission (ICC). The ICC is the governing body that determines if an energy company’s requested rate is based on prudent and reasonable costs. Ultimately, the ICC is the gatekeeper to ensure that a requested rate is allowable and meets state requirements. Transparency is very important in this process. ComEd is required to file its annual rate update by May 1 every year. This filing includes operating, maintenance and investment costs.
WHAT WAS THE OUTCOME OF COMED’S 2020 RATE FILING?
Tracy: The Illinois Commerce Commission approved ComEd’s request for a $14 million decrease in delivery service charges in 2021 compared to rates in effect as of January 2020. It marks ComEd’s third rate decrease in a row, and fifth rate decrease in the past 10 years.
This approval came after an eight-month proceeding during which regulators and stakeholders, including the Illinois Attorney General, the Illinois Industrial Energy Consumers, the Citizens Utility Board and others reviewed the costs and investments that determined customer rates.
What does this latest rate decrease mean for customers?
Tracy: The new delivery rate lowers the average residential customer bill by about $1 per month. This results in an average monthly bill of close to $82, which is lower than what customer bills were in 2008.
What has enabled ComEd to deliver three rate decreases in a row?
Tracy: Many things contribute to a rate decrease, including careful cost management, improved reliability and energy efficiency programs that help customers save money and energy.
First, reliability, which has brought fewer and shorter power outages, has improved more than 70% since the launch of the smart grid program in 2012 that both strengthened equipment and installed new technology that alerts ComEd to problems and helps keep the power flowing. Customers captured $655 million in direct economic value from avoided customer interruptions between the key smart grid investment years of 2012 to 2017. Avoided outages resulted in $2.4 billion in societal savings and 94 million pounds of avoided greenhouse gas pollution, partially due to a reduction in trucks being sent to locate outages.
Also contributing to lower rates are energy efficiency programs that have helped ComEd customers save $5.2 billion on their energy bills since 2008, in addition to avoiding more than 55 billion pounds of carbon emissions, the equivalent of taking more than 5.4 million cars off the road.
What else do you want customers to know about the ratemaking
Tracy: Our focus is on customers. I see my department as a function of customer service since customers are always front of mind. Whenever my team contemplates something, I always ask two questions: What is the bill impact and how will that affect customers?
What do you like most about your job?
Tracy: I like knowing that the work we do in regulatory helps to support and enable the investments the company can make to meet the energy needs of customers today and in the future. I’m fortunate to be able to interact and collaborate with different groups across the company and have exposure to some of the strategic projects and initiatives that support these efforts. Collaborating with different groups with the goal of protecting customers and ensuring they have safe, affordable and reliable energy is very rewarding.