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ComEd offers $120M for equity programs as part of Chicago electricity deal

ComEd would spend up to $120 million in shareholder dollars on clean energy and workforce training in what the utility and other backers call a “ground-breaking” agreement being considered by Chicago’s City Council. 

The agreement was crafted to try to gain approval for renewing ComEd’s larger franchise agreement with the city. There’s been significant opposition from activists and some City Council members to the proposed franchise agreement. The previous 30-year deal expired in 2021, just as a major bribery scandal involving the utility and state officials was unfolding.

A new agreement won’t likely be inked before Mayor Lori Lightfoot’s term expires in May. But Citizens Utility Board Executive Director Dave Kolata said it’s crucial that the proposed Energy and Equity Agreement, and by extension the franchise agreement, pass this year — so that the shareholder funds can be used to leverage incentives contained in the federal Inflation Reduction Act.

Kolata said the Citizens Utility Board neither explicitly supports nor opposes the franchise agreement, but wants to see the process move forward quickly, a potential challenge since a new mayor will be taking office in May.

“Given the direct pay incentives in the IRA, there’s a real opportunity to lever that $100 million and turn it into something like $400 or $500 million and go from there,” Kolata said, referring to the fact that the Inflation Reduction Act allows tax credits to be basically paid out as cash for nonprofits or entities that don’t owe enough taxes to tap credits.

“It will be important for the next mayor, who obviously will have a lot of issues to deal with, including realistically things that may be bigger priorities. But you’ve got a reasonable starting point here,” Kolata said. “We don’t want this to linger multiple years. We think the $100 million is a good start, though we have some questions around the governance of that, it would likely require some tweaks. The big add at the end of the day is the shareholder dollars.”

Some City Council members and community advocates have argued the proposed 15-year franchise agreement is too long and includes too few consumer protections, especially in light of the scandal, which involved the indictment of former state House Speaker Michael Madigan.

Six Chicago council members signed a statement denouncing Lightfoot after a resident who spoke against the franchise agreement at a Feb. 1 community meeting was removed from the meeting despite apparently violating no rules.

Mayoral candidates Brandon Johnson, a progressive former teacher, and Paul Vallas, former head of Chicago’s public schools, have both demanded the franchise agreement not be signed during Lightfoot’s term; indeed the City Council schedule would make that nearly impossible.

What would the deal mean for Chicago’s climate goals?

City and ComEd officials say the Energy and Equity Agreement will help cut carbon emissions in the utility’s northern Illinois service territory. It calls for ComEd to develop a workforce training center on Chicago’s West Side and spend at least $10 million to train up to 10,000 Chicagoans for clean energy jobs.

Under the agreement, a new nonprofit organization similar to a trust would be set up to distribute the funds, run by a stakeholder board. The organization could seek additional funding, including through federal programs, with $100 million coming from ComEd over the 15-year franchise agreement term with an additional $20 million if the agreement is extended for five more years. 

“The Energy and Equity Agreement allows us to work cooperatively with the city and ideate together some things we might want to explore,” said ComEd senior manager of strategic planning Amanda Gomez. “Building something maybe a little stronger, maybe there’s a different need or gap, the agreement gives us the space to come up with those ideas and pursue them.”

“Really no cities have done something similar,” added ComEd general counsel Glenn Rippie. “We are confident that this agreement is groundbreaking; it delivers huge benefits to the people of the city and frankly to our joint goals.”

Rippie said the utility can likely recoup its spending, through energy bills, for the promised workforce training center and training itself. It cannot make a profit on programs that would be considered operating expenses, as it does on capital investments that have a baked-in rate of return.

If ComEd builds and owns an investment, potentially including a training center, it can seek a profit on its investments. Meanwhile, if state regulators deny cost recovery for clean energy training or other clean energy programming, Rippie said, then ComEd would use the $100 million shareholder funding pot. 

Angela Tovar, chief sustainability officer for the city of Chicago, said the equity agreement is years in the making.

“What is unique about this moment is that we back in 2020 communicated to the utility that we would not enter into a new franchise agreement until we aligned on energy and equity priorities,” she said. “For the last few years, we’ve been defining those and laying those out.”

Jared Policicchio, Chicago deputy chief sustainability officer, said the equity agreement was informed by the example of cities including Minneapolis, Boulder and San Diego.

“We feel like what we’ve done here builds on these efforts, on the hard work our peer cities have done to utilize the franchise process to realize equitable transition,” he said.

Agreement seeks synergy with state law

The programs ComEd promises as part of the Energy and Equity Agreement would dovetail with efforts already under way funded by Illinois’ 2021 Climate and Equitable Jobs Act. The law bolstered an existing program called Illinois Solar for All that means people meeting certain equity requirements could basically get solar at no cost, though relatively few homeowners in Chicago have tapped the program.

Tovar said funds created by the ComEd agreement could help publicize and connect Chicagoans with the incentives available through the state program.

“What we intended to do with the Energy and Equity Agreement was … utilizing the city’s staff time, our platform for communication, making sure we are coordinating with stakeholders that the city traditionally works with to ensure people are aware” of opportunities, Tovar said. “It’s about increased collaboration to move these projects forward in a more meaningful way.”

ComEd has in the past argued for state legislation and rate structures that clean energy advocates said would curb the expansion of distributed solar. Those proceedings happen before the Illinois Commerce Commission and in the state legislature, and are not directly related to city franchise agreements, which don’t involve rate negotiations but rather the grid in the city.

The Illinois Power Agency oversees the state’s generation mix and procures energy on behalf of ComEd and utility Ameren. Meanwhile, ComEd plays a key role in connecting customers with solar to the grid and upgrading the grid to handle more solar and electric vehicles.

“We have asked for more transparency around their grid infrastructure investments,” Tovar said. “We expect and are requiring more reporting and more coordination, so the city can work with them more proactively.” ComEd has a role in ensuring the city is prepared for the clean energy transition, Tovar continued, “which is why it was so critical we aligned on policies like ensuring we have the infrastructure to support a transition to electric vehicles.”

She said the program could also help ensure that the ComEd interconnection process for residential solar goes smoothly.

“It can be more difficult than it should be for folks to get approval for putting solar on their roofs,” Kolata said. “How does the city interact with the utility processes that can be streamlined and improved? So far it’s been very difficult for companies to build solar in the city of Chicago. This provides an opportunity to streamline processes.”

The state law also funds the development of workforce training hubs around the state. The center ComEd would fund would be separate from these hubs, Rippie said. He noted the equity and franchise agreements also entail hiring goals, “to hire folks who are newly trained particularly from underserved communities, into entry level positions in the ComEd job ladder — jobs that lead into a lifelong career opportunity should people desire.”

Critics push for municipalization 

The franchise agreement includes a provision that after five years, the city could decide to municipalize its utility service. A coalition called Democratize ComEd has called for a much shorter franchise agreement and provisions making it easier for the city to municipalize, namely by curbing the ability of ComEd to charge high amounts for the city taking over its assets.

Democratize ComEd’s members include a graduate student labor union, environmental groups, and the Democratic Socialists of America, with which some City Council members are aligned. 

Municipalization has been attempted in Boulder, Colorado and other cities. The effort in Boulder ultimately failed, though a 2020 settlement between utility Xcel and the city capped costs at $200 million the city would need to pay the utility if they want to try municipalization in the future. A 2020 study commissioned by the city of Chicago found municipalization would cost about $3.9 billion. 

“The overall availability of municipalization is something that the city takes seriously,” Policicchio said. “We certainly considered it important to have as an option. That being said, we did a pretty careful in-depth preliminary municipalization study, and ultimately the recommendations were it was not the best option for the city at this time. It would be a monumental undertaking.”

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