Chicago Comed Franchise Agreement

In 2009, the U.S. Environmental Protection Agency`s Chicago office commissioned a study to evaluate franchise agreements for municipal plants in seven Midwestern states and found no examples of unbilled energy use outside Illinois. Payers in cities that do not receive unbilled energy also pay a deductible fee. But their governments are being urged to reduce energy consumption in all public buildings, which can lead to lower property taxes for residents, Pruitt said. The City of Evanston is preparing to renegotiate its current franchise agreement with ComEd, which expires in September. Unlike most other cities in the region, Evanston`s agreement with ComEd lasts only five years, which the city negotiated decades ago to get the company to address service issues, said Kumar Jensen, Evanston`s Chief Sustainability and Resiliency Officer. For cities that receive electricity not billed by ComEd, the deductible fees charged to taxpayers are determined on the basis of a percentage representing the value of unbilled electricity made available to a municipality, divided by the total electricity bills to small customers and suppliers of the municipality. Chicago has until December 31, 2020 before its current contract with ComEd expires. Under the current franchise agreement, the city must terminate one year if it wants to take over the distribution business. Kolata added that the city had the option of extending the existing franchise contract a little more and giving itself more time to reconsider the short-term communalization. A major obstacle to solving the problem is that franchise agreements generally take longer. According to the CEPOL report, 50-year agreements are customary. The current agreement, concluded in 1992, expires on 31 December, although its terms last until a new agreement is in force or until one of the parties announces its intention to withdraw.

„Ameren Illinois is complying with the terms of existing contracts until it expires,“ Ameren spokeswoman Stacey Stockton-Shangraw said in an email. „Because deductibles are renewed, we use a formula to set cash payments instead of unbilled energy. This is a fairer method that creates consistency and allows municipalities to better exercise their choice of electricity suppliers for their entire energy supply. At the request of the municipality, we will transform the old contracts into a cash compensation model.¬†However, this unbilled energy represents a significant cost to taxpayers in more than 350 municipalities, who together pay hundreds of millions of dollars more than they would normally owe under the agreements. That`s according to estimates by Mark Pruitt, a former director of the Illinois Agency, who has studied how franchise agreements prevent cities from cutting energy costs and investing in clean energy. „My administration will not submit a new franchise with ComEd to the City Council unless the following commitments are declared in an energy and actions agreement in memory and description,“ Lightfoot said in his letter. „Under national law, municipalities have the option of receiving allowances for access to public roads under a franchise agreement. Some municipalities opt for free municipal services.

Many, including Chicago, currently choose to levy royalties through the Municipal Fee Infrastructure. „Essentially, ComEd for [about $38 million] is rent and priority for a lot of land in northern Illinois, which is really expensive,“ Pruitt said.