Ameren Corp. warned an Illinois House committee Monday that passing HB 5766, which would extend a current electricity rate freeze in the state, would lead to gas and power supply disruptions and insolvency for Ameren’s Illinois utilities. Exelon, parent company of Illinois’ Commonwealth Edison (ComEd), made similar predictions recently. State consumer groups, meanwhile, urged lawmakers to stand up to this “bankruptcy blackmail.”

Ameren Illinois Utilities President Scott A. Cisel predicted “grave consequences” from the legislation, including “the insolvency of the Ameren Illinois utilities, significant job losses and significant risk of disruption in electric and gas service.”

Electricity rates in Illinois have been frozen since 1997, but the rate freeze is scheduled to end Jan. 1. An auction conducted last month among power companies determined customers will pay 22-55% more for electricity at the end of the year — 22% more for Commonwealth Edison customers, 45% more for Ameren customers and 55% more for CILCO customers. HB 5766 would prevent those rate increases from taking place.

“It’s important for people to understand that if legislators extend the rate freeze, cash and available credit will dry up,” Cisel said during a hearing at the House of Representatives Electric Utility Oversight Committee. He predicted that the credit ratings of Ameren Illinois’ utilities would be “slashed to deep junk status; we will then run out of cash and available credit and be unable to borrow.

“Consequently, Ameren Illinois utilities will no longer be able to buy power and natural gas. In order to avoid power and gas supply disruptions, we believe it is likely the state would have to step in and pay for these critical commodities, or our Illinois customers will face service disruptions in a matter of months just like those that occurred in California.”

He said Ameren’s Illinois utilities could be insolvent by February 2007 or sooner. And without a state bail-out, there could be blackouts or rotating brownouts for more than one million electric customers and the disruption of gas supply for 800,000 natural gas customers of Ameren’s utilities.

In the aftermath, Cisel predicted that Ameren would be forced to cut 25% of its workforce, or about 700 jobs. Nearly all the companies contractors (700 more employees) would be laid off. Reliability projects would be stopped. New customer connections would be put on hold and all community donations and projects would be halted.

Commonwealth Edison also said recently that such an extension of the rate freeze would be “very bad for Illinois” and for ComEd. “Such a measure would have severely negative consequences for our state, our economy and all consumers,” the company said. “Forcing ComEd into a position where it buys electricity for more than it is allowed to collect from customers would immediately threaten the company’s financial stability and put us at risk of bankruptcy.”

In a letter sent last week to fellow Democrat Gov. Rod Blagojevich, Illinois House Speaker Michael Madigan asked the governor to call a special session to address the rate issue. Madigan said competition among electric providers has not developed as lawmakers intended a decade ago when rates were frozen, and the outcome of the power auction was not what they envisioned. Blagojevich agreed the rate freeze should be extended and promised to work with the House speaker to secure enough votes to get it passed.

Speaking at a news conference in the state capitol Monday, the Citizens Utility Board (CUB) urged lawmakers to stand up to ComEd and Ameren by passing the bill. “First it was ComEd CARES, now it’s ComEd scares,” CUB Executive Director David Kolata said. “These threats are nothing more than bankruptcy blackmail designed to scare the public and elected officials into siding with two very profitable, giant corporations who want to make billions of dollars in extra profits at consumers’ expense.”

Kolata urged lawmakers to pass the three-year extension before Jan. 1. “To say ComEd and Ameren have flourished under the rate freeze is an understatement,” said Kolata . “They’ve got record stock prices, record earnings and they will remain extremely profitable into the next decade without any rate hike.”

Kolata said with higher rates next year, Exelon would “reap close to $2 billion a year in windfall profits” and Ameren will earn “an extra $700 million a year.”

“We can’t continue to pretend we have a competitive electricity market when we don’t,” Kolata added. “We need to face facts, go back to the drawing board and come up with a comprehensive energy policy that protects consumers and not just the corporate profits of ComEd and Ameren.”

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