Separating the signal from the noise on Illinois
Recently, some advocates have circulated a report from Illinois on electric deregulation – a report that should be viewed with great skepticism.
The report erroneously concluded that Illinois’ experiment with electric deregulation has been a great success. The claimed savings are grossly exaggerated and based on faulty projections. Fact after fact demonstrates that electric deregulation is a failure, especially when it comes to keeping rates stable and predictable, ensuring a reliable electric supply and protecting jobs.
Rates: To try to make the case for deregulation, the report ignored the fact that Illinois electric rates were kept artificially low from 1998-2007 by government-mandated rate caps. Electric deregulation resulted in soaring rates for Illinois families and small businesses as soon as those caps ended. The respected PBS NewsHour program even featured stories from Illinois families and businesses paying the price for electric deregulation:
“Sherrill Lausmann of Decatur, Illinois, was shocked by the size of her electricity bill last January. That’s when the Illinois legislature’s freeze on energy prices was lifted. Lausmann’s bill had doubled to $110 a month. It meant she had to cut back on other expenses like groceries, and she had to use electricity sparingly.”
“I couldn’t believe it. It was unbelievable. I mean, it was a big hit. I mean, it’s $3,000 more than I thought it was going to be. It’s tough.” (from the owner of a hockey arena)
Every year since 2007, when deregulated rates were fully allowed to take effect, Illinois rates have been higher than they were before deregulation. Deregulation hasn’t reduced Illinois’ rates – but it has made them much more volatile and unpredictable for families and businesses.
Reliability and Jobs: Like other deregulated states, Illinois has struggled to develop new, reliable electricity generation. Deregulation has resulted in job losses and the possibility that Illinois will not have enough electricity to meet its needs in the future.
Already, hundreds of jobs have been lost in Illinois as a result of electric deregulation. Ameren Energy Resources, the deregulated division of Ameren, laid off 210 employees from 2009-2010. Edison International shut down two Chicago plants earlier than expected, laying off the facilities’ 165 workers.
Many more jobs could be lost in the future thanks to electric deregulation. The very day the Illinois report was issued, Exelon – one of the nation’s largest electric companies – announced it might shutter three Illinois nuclear plants as a result of the state’s deregulated market. The plants employ more than 2,300 people and power more than 4.2 million homes. These good-paying jobs are now threatened as a result of electric deregulation.
Finally, it’s important to look at more than just one state’s experience to judge the success or failure of deregulation. Even though Illinois’ experience provides enough reason to avoid deregulation, only looking at the national perspective provides the full story. No state has passed electric deregulation legislation in 14 years, and nine states have retracted, suspended or re-regulated – for a reason. Electric rates remain 25 percent higher in deregulated states on average than they do in regulated states.
Looking at other states’ examples also strengthens the case against deregulation. Maryland deregulated its electric markets in 1998, when it had rates approximately 4 percent above the national average. Today, Maryland families and businesses pay 16 percent above the national average for electricity. In Delaware, families and businesses paid approximately 2 percent above the national average for electricity in 1998. Today, sixteen years after deregulation in Delaware, families and businesses pay 13 percent above the national average for electricity.
Don’t just take our word for it. Story after story from other states confirm: electric deregulation doesn’t work – and it’s wrong for Michigan.