As ComEd Faces Scrutiny, Municipalization Advocates Appeal to Johnson

For over a hundred years, Commonwealth Edison (ComEd) has delivered Chicago its electricity. The relationship is so old that the “Edison” in the name refers to Thomas Edison, who at one point owned the company. 

Today, for only the second time since 1948, the contract governing that relationship, the franchise agreement, is due to be renegotiated. With ComEd making record profits even as it reels from a federal corruption investigation, the utility is facing calls for greater accountability and control by Chicago residents.

For the Brandon Johnson administration, negotiating a new agreement in line with these calls will require significant political will. This could include action in the state legislature or concrete steps toward municipalization—the public ownership of ComEd’s facilities. But whatever form it takes, the new franchise agreement will determine the course of a once-in-a-generation opportunity to redefine the City’s relationship with ComEd.

In December 2020, the previous ComEd franchise agreement signed by Mayor Richard M. Daley in 1992 expired. After two years of negotiations with Mayor Lori Lightfoot’s administration, in January 2023, Lightfoot announced a proposed agreement with the company that she heralded as the “strongest municipal utility franchise deal in the country.” Highlights included $520 million in community benefit projects, a new West Side clean energy training hub, and the training of more than 10,000 students for jobs in clean energy, over the course of a shorter, fifteen-year deal. 

The proposal was quickly delayed by a skeptical City Council concerned by its length, the proposed pause on municipalization, and perceived favorability to a company mired in scandal. A potential win for the mayor before the 2023 mayoral election became dead weight. By February, when Lightfoot failed to advance beyond the primary, the two remaining contenders were calling for a new deal negotiated by a new mayor. 

Mayor-elect Johnson has not commented publicly on the specific changes he seeks from the previous administration’s deal. The mayor’s office did not respond to the Weekly’s request for comment.

But with Johnson’s powerful promises of a just green energy transition, city decarbonization by 2040, and the “exploration” of municipalization, a new deal would need to be significantly tougher on ComEd. Yet the City “does not have a lot of leverage,” especially given the state legislature’s outsize role in regulation, according to Abe Scarr, director at Illinois PIRG, a citizen-funded public interest group in Illinois.

As the largest electricity provider in the state and a subsidiary of the massive Exelon company, ComEd is a formidable bargaining partner. Its previous franchise agreements have lasted decades, giving the City little wiggle room to make changes or exact concessions. 

Over the last ten years, ComEd has seen its profits rise exponentially, with a series of legislative victories in Springfield expanding its ability to set favorable rates and avoid regulatory oversight. According to Scarr, “ComEd got what they wanted at the legislature after the scandal. They made out like bandits.” 

This has been exacerbated by inaction from lawmakers, despite ComEd’s recent history of corruption and bribery. In 2020, a federal investigation revealed an extensive bribery scheme in which former Illinois House Speaker Michael Madigan and leadership at ComEd conspired to pass legislation beneficial to the company. At that time, ComEd paid a $200 million fine in a deferred prosecution agreement. 

But other key players continue to be enmeshed in further litigation. The “ComEd Four” trial wrapped up this May with a guilty verdict for all defendants who were key leaders and powerful lobbyists for the utility, including former CEO Anne Pramaggiore, for conspiracy, bribery and falsification of records. A separate trial for Madigan is set to begin next year, in 2024.  

Encapsulating both ComEd’s enduring power and the uphill battle the Johnson administration faces is the 2011 Energy Infrastructure Modernization Act (EIMA). Also known as the Smart Grid law, the EIMA upgraded Chicago’s dated energy grid. But it came to be one of the major pieces of legislation at the heart of the ComEd bribery scandal when it was revealed that the revamping of the rate system had significantly increased ComEd’s profits. 

This legislation introduced the “formula rate-setting” system, which allowed ComEd to charge thirty-seven percent more for delivery service over ten years, adding $5 billion to its rate base, according to a 2020 report from IL PIRG. The bill passed despite opposition from numerous consumer groups, then-governor Pat Quinn (whose veto was overridden), and Madigan’s daughter, then-Illinois Attorney General Lisa Madigan. 

ComEd contends that the law brought real benefits for consumers, improving reliability and modernizing infrastructure. For Scarr, this is the bare minimum: “Anytime you spend $8 billion on the electric grid, customers are bound to see some benefits. But the question isn’t whether there were benefits, it’s whether it was worth the cost.” 

Although these formula rates were done away with in the 2021 Climate & Equitable Jobs Act (CEJA), the legislature will allow ComEd to profit from the old rules. Using a process known as reconciliation—a mechanism that will remain available in the new rate-setting rules—ComEd can hike electricity rates with little oversight. In April, Crain’s Chicago Business reported that ComEd had filed for a $250 million rate adjustment that will be added to bills in 2024.

With much of the regulatory power held in Springfield, the Johnson administration is limited in its ability to win concessions from ComEd. One proposed way for the city to gain leverage is through municipalization, the process by which a local government takes over utility facilities. In most cities across the country, private companies like ComEd provide this service. However, a growing number of cities and municipalities have opted for public power, which, in theory, reduces the profit incentive at the heart of private ownership. 

For Matthew Cason, campaign coordinator for Democratize ComEd, a group that advocates for public power in Chicago, municipalization represents a paradigm shift in the community control of its power. Assuming the city took over the utility, “without changing anything at all, [the revenue] would be enough to run the utility and pay for all the debt to purchase it, and leave between $50 to $100 million for the city to use as it sees fit,” Cason said.

In the past few years, this idea has gained momentum in Chicago; advocates like Democratize ComEd and elected officials like Alderman Daniel La Spata have championed the idea in City Council. Johnson ran on a platform that included “exploring the idea of electricity municipalization.” 

In the proposed Lightfoot deal, the city would have only been able to explore municipalization five years after signing. For Cason, this is evidence that ComEd takes the threat seriously, as “currently under Illinois law, all [cities] have the ability to municipalize their utility.” By implementing a five-year pause on municipalization, the provision “weakened the City’s hand and weakened our authority.” 

Skeptics point to the tremendous cost of municipalization as a major problem. In 2020, the Lightfoot administration commissioned a study run by NewGen Strategies and Solutions, which according to Cason was the result of “[Democratize ComEd] advocacy.” It found the minimum cost of municipalization as approximately $4 billion, a number that the Lightfoot administration found unfeasible. 

Cason rejects those findings, arguing that the study’s inherent flaw was its assumption that the cost of the purchase would be shifted to consumers via rate hikes. Instead, Cason posits that the City’s purchasing debt could be “paid out of ComEds existing profits.”

Still, for a city that has a long history of budget problems, municipalization would be a drastic move. Chicago already runs one utility, its water department, which has a mixed record. No American city of Chicago’s scale runs on public power. 

For Scarr, municipalization “certainly has some momentum…that said, I don’t think ComEd sees it as a viable threat.” Regardless of whether the Johnson team takes this path, changing the status quo will require the marshaling of significant political leverage.

“We look forward to working with the new administration to negotiate an agreement that meets our shared goals for a cleaner, healthier energy future,” ComEd said in a statement.

Indeed, ComEd is under no pressure to work out a deal that is not on their terms. As long as there remains no new deal, the relationship is governed by default on the old agreement. With little appetite for change in Springfield, and with the city facing myriad challenges beyond its electric grid, Chicagoans will likely continue to face rising electricity bills unless more drastic action is taken. 

Reimagining Chicago’s power will require serious political power, representing an early test of the new administration’s ability to make good on its big promises. Until then, the city’s century-long relationship with ComEd continues.

Matthew Murphy is a barback living the dream in Chicago. He previously wrote for the Weekly about CTA rapid transit.